Rupee vs dollar: After falling below 90 per US dollar rates on Wednesday, the Indian National Rupee (INR) extended its free fall for the seventh straight session on Thursday and touched a new lifetime low amid punitive US tariffs, persistent foreign portfolio outflows, and sustained dollar buying by banks. The currency slipped to an all-time low of ₹90.30 per US dollar on December 3, 2025. With a 5.3% year-to-date (YTD) drop, the rupee is headed for its sharpest annual decline since 2022, and has emerged as Asia’s worst-performing currency so far this year.
However, currency experts believe that a falling Indian Rupee against the US dollar doesn’t mean the Indian currency is weak. They said that the Indian Rupee is falling due to policy uncertainty, such as the delay in the India-US trade deal, continuous outflow of the FPIs from the Indian stock market, the RBI’s clear-cut stance to remain away from the role of an ‘interventionist’, etc.
Speaking on the reasons that are dragging the INR against the USD, Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI Research, said, “The decline in the value of the currency is being driven to the edge by trifecta of limbos in US-India trade deal, FPI outflows, chiefly equities (after two years of robust inflows) and RBI’s clear stance of distancing itself from an ’interventionist regime’ while wagering all it takes on excessive volatility by traders, arbitrageurs and jobbers. Separately, offshore NDF has also gained momentum while signs of resurgence in the Dollar index are quite palpable.”
The SBI Research expert stated that a falling rupee shouldn’t be a concern, as India’s trade data remains positive.
“The overall goods and services deficit till Apr-Oct was at $78 bn, marginally higher against $70 bn in the like period the previous year. Clearly, the negative trade data has been oversold to the market.
Resilience in the Indian Rupee
Highlighting the feature of the Indian currency most of the major currencies of the world don’t have, Soumya Kanti Ghosh said, “Since 02 Apr’25, when US announced sweeping tariff hikes across economies, Indian rupee (INR) has deprecated by ~5.5% against USD (most amongst the major economies), notwithstanding sporadic phases of appreciation owing to optimism over positive, mutually beneficial conclusion. However, while INR is the most depreciated currency amidst select major economies, it is not the most volatile. Analysis of the coefficient of variation indicates that INR is one of the least volatile currencies since April 2, 2025 (~1.7%). This clearly indicates that the high slab of 50% tariff imposed on India, substantially higher than peers like China (30%), Vietnam (20%), Indonesia (19%), and Japan (15%), is one of the major factors behind current phase, notwithstanding evident efforts on Indian exports diversification and FTAs though ~$45 billion worth of major Indian exports is expected to be impacted by US tariff, mostly in labour intensive areas.”
Does a falling Rupee mean weakness in the Indian currency?
On whether falling INR against the USD means weakness in the national currency, Pravesh Gour, Senior Technical Analyst at Swastika Investmart, said, “The Indian rupee hitting a fresh record low of 90.14 per US dollar reflects strong global pressures rather than domestic weakness. A firm US dollar, elevated crude oil prices, and continued demand for dollars from importers and foreign investors have weighed on the currency. While India’s macroeconomic fundamentals remain stable, the RBI is likely to allow a gradual depreciation, intervening only to curb sharp volatility. In the near term, the rupee may remain under pressure, with global cues—especially the US dollar and crude prices—driving its movement.”
RBI’s non-protectionist approach
Pointing towards the RBI’s confidence in the Indian Rupee, Soumya Kanti Ghosh of SBI Research said, “At present, the ability of market participants to supply Greenback is quite limited, leaving the Mint Street as the last resort and ultimate supplier of USD to the market but the RBI has likely chosen a restrained approach, avoiding aggressive interventions as part of its policy not to protect any level.”
What data suggests
Looking at the REER data of a 40-currency basket with base 2015-16, the index was above 100 until May 2025, but the onset of the trade war has pulled it below the 100 level, as the rupee lost more ground compared with other EM currencies. Since April 2023, the INR has declined by ~10%, and the REER reached its lowest level of 97.40 in September 2025, marking a 7-year low since November 2018. Furthermore, the latest RBI REER data as of October 2025 indicates that the rupee is undervalued for the 3rd consecutive month, reflecting a softer currency and lower inflation. The NEER has also weakened dramatically, to 84.6 in October 2025 from 92.1 in June 2024, indicating depreciation of the rupee.
Analysing the data across spot and forwards markets, the combined excess demand in the merchant market has been $102.5 billion. According to the latest available data, the RBI has intervened around $18 billion in the forex market during June-September, and we have estimated (based on forward market data) another approximately $10 billion in October 2025. As of October 25, the total amount stands at around $30 billion, while foreign exchange reserves declined by $15 billion during the same period. The scheduled visit of the Russian President to India, along with the impasse on oil imports despite the slowdown in volumes, could keep the rupee moving in a tight zone.
Select importers have shown an inclination to leave positions unhedged, seeking to benefit from lower devaluation compared to the interest rate differential. They often pay forward premiums to hedge, but the current environment has encouraged risk-taking, adding pressure on the rupee. FPIs have also maintained open positions to capture additional gains. Historically, the rupee has been one of the most stable currencies in the world. Still, the one-month NDF (non-deliverable forward) is now trading 7–8 paise above the actual interest rate differential, exerting additional downward pressure as FPIs hedge their open positions amid panic in NDF markets.
Key Takeaways
- The Indian Rupee’s depreciation does not indicate a fundamental weakness in the Indian economy.
- Global economic pressures, including US tariffs and foreign portfolio outflows, are primary contributors to the rupee’s decline.
- RBI’s restrained intervention approach suggests a long-term strategy rather than immediate currency defense.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
