Indian Rupee Drops to New All-Time Low of 89.76 Versus the US Dollar

Indian Rupee Slips to All-Time Low as Market Forces Overpower India’s Strong GDP Print

The Indian currency endured a turbulent start to December, marking a new record in its downward trajectory. Rupee slips to all-time low became the defining theme of the market on Monday as the Indian rupee fell to 89.76 against the US dollar, breaching its earlier lifetime low of 89.49 touched just two weeks ago. The fall came despite India’s impressive 8.2% year-on-year GDP growth for the July–September quarter, underscoring how strong domestic activity has failed to cushion the currency against global and structural pressures.

This latest depreciation means the rupee has weakened by nearly ₹1 against the dollar since November 3, placing it among the world’s worst-performing currencies in 2025 — ahead of only the Turkish lira and Argentine peso.

Strong GDP, Record-High Equities, Rising Yields — Yet Rupee Weakness Persists

India’s strong macroeconomic data offered no respite to the currency market. While the solid 8.2% GDP reading sent the Sensex and Nifty to fresh lifetime highs and nudged benchmark bond yields upward, none of these supported the rupee.

Equities surged earlier in the day, but the currency remained trapped in its downward slide. Reuters reported that overseas investors sold around $400 million worth of Indian equities on Friday, taking total foreign outflows past a staggering $16 billion so far this year. Meanwhile, the 10-year government bond yield rose to 6.553%, the highest level in nearly a week.

The divergence between strong economic output and a weakening currency highlights persistent external imbalances and sustained dollar demand in the market.

Also Read : Sensex and Nifty End Flat After Retreating From Record Highs in a Volatile Session

Forward Market Maturities Add Pressure as RBI’s Forward Book Expands

Traders noted that maturities of large positions in the non-deliverable forwards (NDF) market contributed to the latest bout of depreciation. These offshore markets, heavily driven by global investors, often add volatility to emerging market currencies.

Adding another layer of complexity, data released after market hours showed that the RBI’s forward book expanded to over $63 billion in October. This indicates active management of forward positions but also signals that spot-market intervention has been relatively measured — giving the rupee more room to adjust to market demand and supply.

Why the Rupee Slips to All-Time Low: Trade Deficit and Delayed US Deal Intensify Pressure

Experts say that structural pressures continue to outweigh short-term economic positivity. According to Dilip Parmar, Senior Research Analyst at HDFC Securities, the rupee’s decline reflects “strong market demand for the US dollar coupled with constrained supply.” He added that widening trade deficits, a delayed India–US trade deal, and limited RBI intervention have kept the currency under sustained pressure.

The outlook remains weak in the near term. Parmar highlighted that spot USDINR faces resistance at 89.95 and support at 89.30, suggesting the rupee may remain volatile within this range.

The much-anticipated reduction in steep 50% tariffs on Indian exports, expected after encouraging statements from both governments last month, has not materialised. The absence of a concrete agreement has negatively impacted both trade flows and portfolio investment sentiment.

FII Outflows Continue as Rupee Weakens and Global Risks Rise

Foreign investors have been consistent sellers through most of the year, withdrawing more than $16 billion from Indian equities. This sustained selling spree has been a critical contributor to currency weakness, as fewer dollar inflows from institutional investors mean reduced support for the rupee.

The global environment has also turned more challenging. Risk-off sentiment has aggravated outflows from emerging markets, with investors gravitating toward safer US assets amid expectations of delayed Federal Reserve rate cuts. This trend has amplified the rupee slips to all-time low narrative, with India not being an exception to broader EM currency weakness.

India’s Trade Deficit at Record High Deepens Structural Imbalance

Another key factor behind the rupee’s depreciation is India’s ballooning trade deficit. The country’s merchandise trade deficit hit an all-time high in October, driven by elevated commodity prices and rising import volumes. Surging gold and silver prices have further inflated the import bill, intensifying dollar demand in domestic markets.

A high trade deficit means India consistently requires more dollars to finance imports than it earns through exports — exerting downward pressure on the rupee.

Rupee Weakness Expected to Persist Despite Strong Domestic Fundamentals

Even with India’s strong economic performance, resilient consumer demand, and robust equity markets, analysts warn that the rupee may remain under pressure in the near term. The combination of global macro uncertainty, domestic trade imbalance, and foreign investor outflows forms a potent mix that limits recovery potential.

The structural imbalance between dollar demand and supply remains the biggest hurdle. Unless global commodity prices cool, trade negotiations show progress, or foreign portfolio flows turn positive, the likelihood of the rupee reclaiming lost ground remains slim.

For now, the currency’s direction will continue to be driven by a delicate balance of domestic fundamentals and global headwinds. As India approaches a critical macro policy period, stability will depend not just on RBI’s stance but also on how international markets shift in response to geopolitical and economic changes.

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