The rupee breached the 90-mark against the US dollar for the first time on Wednesday, after the Indian currency fell 6 paise to 90.02 in early trade. As of 2025, the rupee has weakened by over 4.51% so far, and its decline has been 6.11% over the past year. The reasons behind the latest fall are being attributed to continued equity outflow by foreign institutional investors (FIIs) and continued buying of US dollars buying US dollars by banks. Also, the trade deficit is potentially widening with export growth slowing down, and the deal with the US is still not on the table, adding to the sentiment which is driving the rupee down.

The rupee had another eventful day on Tuesday as well. After days of steady pressure, the currency slipped to a fresh record low of 89.95, before finally settling at 89.87. There could have been a steeper decline in the rupee price against the USD, though it was stopped by a weaker dollar index. Additionally, there was a fall in global crude oil prices.

At the interbank foreign exchange, the rupee opened at 89.96 against the greenback and slipped to a record intra-day low of 90.15 before recovering some ground to trade at 90.02, down 6 paise from its previous close, news agency PTI reported.

“Hence, the importers are rushing in while exporters are holding back. The dollar index is less than 100, and hence the rupee should be firm. The RBI appears to be silent on intervention. All this is adding to the sentiment which is driving the rupee down. This will help exporters at the margin, but it is not good for importers or inflation. Any sale of dollars will also mean pressure on liquidity. The IMF also had something to say about the rupee movement sometime back. Therefore, this is an interesting situation,” Madan Sabnavis, Chief Economist, Bank of Baroda writes.

He says the dollar should get weaker in 2026 if the Fed continues with its rate cuts. “But will the rupee strengthen? Will the trade deal happen and be one which favours us? Will FPIs come in large numbers, especially debt? These are questions being posed, for which we do not have any answers.”

The slide didn’t come out of nowhere; it has been building, bit by bit, ever since the India–U.S. trade deal began stalling and foreign inflows slowed, CR Forex Advisors said in its latest commentary. Calling December a crucial month for the rupee, the commentary states that the upcoming RBI policy announcement and the US Federal Reserve meeting will give a clear picture. “A neutral stance may not shake markets much. But any hint of a rate cut could put fresh pressure on the rupee, especially with the currency already in a fragile zone. Also, a Fed cut usually softens the dollar — potentially giving the rupee some breathing room.”

The continuous decline has increased pressure on import costs and raised concerns among traders who have observed the rupee losing ground throughout the month. Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said markets now want concrete numbers rather than broad assurances, leading to accelerated selling in the rupee over the past few weeks. “Record-high metal and bullion prices have further worsened India’s import bill, while steep U.S. tariffs continue to strain export competitiveness. This has kept weakened sentiment across equities compared to global markets and import-heavy sectors such as mineral fuels, machinery, electrical equipment, and gemstones.”

With the RBI policy announcement on Friday, markets expect clarity on whether the central bank will step in to stabilise the currency. “Technically, the rupee is deeply oversold, and a move back above 89.80 is essential for any meaningful recovery,” says Trivedi.