Rupee weakens to fresh record low of 91.01 as unprecedented decline continues
The rupee is Asia's worst performing currency in 2025, declining 6% against the US dollar, as 50% US tariffs weighed on India in absence of a trade deal.
The Indian Rupee slipped to an all-time low for the fourth consecutive session on Tuesday as multiple headwinds came together for a perfect storm.
The currency lost 36 paise from its previous close to hit its lowest-ever level of 91.14/dollar, but regained some ground to end the day 23 paise lower at 91.01. Even a weaker dollar and a sharp decline in global crude oil prices could not prevent the slide, forex traders told PTI.
- The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08% lower at 98.23.
- Brent crude, the global oil benchmark, was trading 1.78% lower at $59.48 per barrel in futures trade.
- The 30-share Sensex fell 533.50 points to settle at 84,679.86. The Nifty 50 was down 167.20 points at 25,860.10.
The rupee has fallen from 90/dollar to 91/dollar in the last 10 trading sessions. The unit has slipped 1% against the greenback in the past five sessions alone.
The 92 per dollar mark is likely this month, traders said.
“Absence of RBI intervention, delays in the India-US trade deal, and continued FII outflows have weighed on the currency,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities. “Elevated gold and silver prices have further strained the import bill. The rupee is likely to trade in a 90.50-91.25 range in the near term.”
The rupee is Asia's worst performing currency this year, declining as much as 6% against the US dollar. The rupee is down over 8.5% from its year-to-date peak of 83.77 hit in May. That underscores the impact of 50% US tariffs on India's exports, especially since India is the only major economy without a trade deal with the US.
“The sharp weakness in rupee was not expected today since the trade data has come better than expected,” VK Vijayakumar, chief investment strategist at Geojit Investments Ltd., told HT.com over email. “Covering of short positions may be a factor in today’s decline. Sustained FII selling is acting like a vicious cycle pulling the rupee down.”
Impact of rupee's decline on Indian economy
To be sure, the rupee depreciation against the US dollar is not hurting the Indian economy. Normally, the RBI sells dollars to stem the rupee's slide but hasn't been the case of late due to healthy macros.
“The RBI’s policy has been to let the currency decline. Low inflation in India is the reason for this non-intervention by the central bank,” he said. “The rupee depreciation is not hurting the economy. India’s declining trade deficit is positive for the rupee.”
- India's trade deficit narrowed to a five-month low of $24.53 billion in November as gold imports fell and exports to the US picked up despite punitive tariffs.
- India's inflation rate inched up to 0.71% in November from a record low in October but that's still well below the RBI's 4% target.
- At 8.2% in July-September, the Indian economy grew at the fastest pace in six quarters, underscoring the resilience of the world's fourth largest economy in the face of steep Trump tariffs.
A reversal in the rupee's fortunes is unlikely unless there is a breakthrough in India-US trade negotiations.
“The path of least resistance is still for USD/INR to rise from here on, given uncertainty around tariffs, but we are hesitant to chase USD/INR higher at these elevated levels,” MUFG said in a note on Tuesday.
Rupee impact on India's stock market
Such has been the rupee slide that it's now threatening the nascent recovery of India's $5.2 trillion stock market.
The benchmark NSE Nifty 50 Index retreated about 1.7% from near an all-time high in November, before recovering some losses. In December alone, global funds have withdrawn $1.6 billion from local equities, reversing $1.3 billion of inflows over the prior two months. They also pulled money from local debt.
Overseas investors have net sold over $18 billion of local stocks this year, and are on track for the largest annual outflows ever.
Clearly, the steepest US tariffs in Asia have weighed on sentiment as traders await signing of a India-US trade deal.
“Foreign investors have continued to pare exposure to Indian equities and debt, resulting in steady dollar outflows,” Akshat Garg, head of research at Choice Wealth, told Bloomberg News. There is “growing pressure on the currency amid a combination of global uncertainty and India-specific capital flow challenges.”
Stocks to buy amid a Rupee slide
A weaker rupee does benefit companies that earn a large share of revenue overseas, particularly technology exporters. The Nifty IT index has climbed about 14% since the end of September, coinciding with the period in which rupee losses deepened.
Equities face muted returns as weaker rupee, range-bound government bond yields, and modest earnings growth “favour selective sectoral exposure”, said Dhananjay Sinha, head of research at Systematix Shares and Stocks Ltd.
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A sliding rupee benefits tech, pharmaceutical and metal stocks, but hurts banks, energy producers and infrastructure companies, Sinha wrote.
