The Indian rupee tumbled to a fresh historic low against the US dollar in early trade on Wednesday, breaching a critical psychological barrier as foreign capital fled and geopolitical factors weighed on sentiment.
Rupee Breaches 90-Mark for the First Time
On December 4, 2025, the domestic currency opened weak and slumped by 28 paise to hit an unprecedented level of 90.43 against the American greenback. This marked the first instance in history where the rupee crossed the 90 threshold, signaling intense pressure on the currency.
The decline was not sudden but part of a persistent trend driven by two major headwinds. The primary factor has been the relentless selling of Indian equities by foreign portfolio investors (FPIs). This sustained capital outflow creates a significant demand for dollars, directly weakening the rupee's position.
Geopolitical Tensions and Trade Deal Uncertainty
Compounding the market's anxiety is the unresolved status of the US-India trade deal. The uncertainty surrounding this crucial agreement has made investors cautious. This sentiment was further amplified by the Modi government's diplomatic engagement with Russia, as it rolled out the red carpet for Russian President Vladimir Putin.
While fostering bilateral ties, such high-profile visits can influence global perceptions and add layers of complexity to India's trade negotiations with Western nations, particularly the United States. The market is interpreting these developments as potential factors that could delay or complicate the much-anticipated trade pact.
Implications for the Economy and Markets
A currency hitting an all-time low has wide-ranging consequences. It makes imports more expensive, potentially fueling inflation, especially for critical items like crude oil and electronics. For companies with substantial foreign debt, repayment costs will rise in rupee terms, squeezing their finances.
However, exporters could benefit as their earnings in dollars translate into more rupees. The Reserve Bank of India (RBI) likely intervened in the market to curb excessive volatility, but the overall trend reflects deep-seated global and domestic concerns. The rupee's performance will now be closely watched for its next move, dependent heavily on FPI flows and diplomatic developments.
The record fall underscores the fragile interplay between global capital movements, geopolitical diplomacy, and domestic economic stability. Investors and policymakers alike will be monitoring the situation closely in the coming days.
