The rupee's slide to record lows in late 2025

The exchange rate is the price of one currency in terms of another, and for India the most watched rate is rupees per United States dollar. India does not fix the rupee at a particular level. The Reserve Bank of India intervenes in the foreign exchange market from time to time, selling dollars and buying rupees to reduce volatility, but it does not defend a specific rate, and the rupee's value is ultimately set by supply and demand for dollars, including trade flows, investment flows, and expectations.

In late 2025, the rupee fell to a series of record lows. In November 2025, it depreciated by about 0.8 per cent in the month and closed at a record low of 89.46 rupees per dollar on 28 November, after breaching 89 rupees for the first time in the same month. On 21 November, it had closed at 89.49 rupees per dollar, after intraday trading between 88.60 and 89.67. The trigger, according to market reporting, included a widening trade deficit, foreign portfolio outflows, uncertainty over a trade deal with the United States, and expectations about United States interest rates.

The slide continued into December. On 1 December 2025, the rupee fell to 89.76 rupees per dollar, and on 3 December it breached 90 rupees for the first time, closing at a fresh all-time low of 90.19 rupees per dollar, after intraday trading up to 90.30. For the calendar year to that point, the rupee had depreciated by about 5 per cent against the dollar, even though India's growth remained strong and inflation had eased, a combination that puzzled some observers.

Several factors were cited for the weakness. India's merchandise trade deficit widened to 41.68 billion dollars in October 2025, from 32.15 billion dollars in September, increasing demand for dollars to pay for imports. Foreign investors sold Indian equities, with net equity outflows for the year reported at more than 16 billion dollars by early December. Importers, anticipating further depreciation, bought dollars in advance, and the lack of visibility on a United States trade deal added to uncertainty. The Reserve Bank intervened at times, but, according to market reporting, restrained its intervention rather than spending reserves to hold a particular level.

A weaker rupee has mixed effects. It makes imports, especially crude oil, more expensive in rupee terms, which can feed into inflation, but it makes Indian exports cheaper in dollar terms, which can help exporters, provided tariffs and demand do not offset the benefit. For households, the most visible effect is on the cost of imported goods, travel, and education abroad, while for the government, it affects the rupee cost of external debt and of oil imports.