The Indian rupee extended its losing streak for the seventh consecutive session on Thursday, tumbling to a fresh all-time low against the US dollar. The currency breached the psychologically significant level of 90, closing at a historic low of ₹90.30 per US dollar on December 3, 2025. This marks a sharp year-to-date (YTD) decline of 5.3%, positioning the rupee as the worst-performing currency in Asia this year and setting it on course for its steepest annual fall since 2022.
What's Driving the Rupee's Persistent Decline?
Currency analysts point to a confluence of global and domestic factors behind the rupee's slide. The primary catalysts include punitive new US tariffs, persistent selling by foreign portfolio investors (FPIs), and consistent dollar demand from domestic banks. Notably, the Reserve Bank of India (RBI) has adopted a restrained approach, avoiding aggressive intervention to defend any specific level.
Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI Research, identified a "trifecta of limbos" pressuring the currency. "The decline is being driven by the uncertainty around the US-India trade deal, FPI outflows—especially from equities after two strong years—and the RBI's clear stance of distancing itself from an interventionist regime," he explained. He added that momentum in offshore non-deliverable forward (NDF) markets and a resurgent US dollar index are also contributing factors.
Is a Falling Rupee a Sign of a Weak Economy?
Experts unanimously argue that the rupee's depreciation does not reflect inherent weakness in the Indian economy. They emphasize that the movement is largely due to strong external global pressures rather than deteriorating domestic fundamentals.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart, clarified, "The rupee hitting a fresh record low reflects strong global pressures rather than domestic weakness." He cited a firm US dollar, high crude oil prices, and sustained dollar demand from importers and foreign investors as the main weights on the currency. Gour expects the RBI to allow a gradual depreciation, stepping in only to curb excessive volatility.
Dr. Ghosh highlighted the rupee's underlying resilience. Despite being the most depreciated major currency since the US announced tariff hikes on April 2, 2025, it is not the most volatile. "Analysis shows the INR is one of the least volatile currencies since April 2, with a coefficient of variation of about 1.7%," he noted. He attributed the significant pressure partly to the disproportionately high 50% tariff imposed on India by the US, compared to 30% on China and lower rates on other trading partners.
Data Points and Market Dynamics
Economic indicators provide a nuanced picture. The Real Effective Exchange Rate (REER) for a 40-currency basket has dipped below 100, indicating the rupee has lost more ground than other emerging market currencies. The REER hit a seven-year low of 97.40 in September 2025. As of October 2025, the rupee has been undervalued for three consecutive months.
Market data reveals substantial dollar demand. The combined excess demand in the merchant market has been $102.5 billion. The RBI has intervened in the forex market to the tune of an estimated $30 billion between June and October 2025, during which time foreign exchange reserves declined by $15 billion.
Adding to the pressure, some importers are leaving their positions unhedged, betting that the cost of rupee depreciation will be less than the interest rate differential for hedging. This risk-taking behavior, coupled with FPIs maintaining open positions to capture gains, has intensified downward pressure on the currency.
Disclaimer: This article is for informational purposes only. The views and recommendations are those of the individual analysts. Readers are advised to consult certified experts before making any investment decisions.
