On December 3, 2025, the Indian rupee fell below 90 against the US dollar for the first time, hitting a record low of 90.14-90.16. Uncertainty over the US-India trade deal and foreign investor outflows were key factors. This raises risks of higher inflation.
The Indian rupee tumbled upon opening on December 3, 2025, sliding from 89.96-89.97 against the US dollar to a record low of 90.14-90.16. The previous close was 89.96-89.97, down 43 paise on Tuesday. Forex dealers attributed the fall to dollar buying by importers, delays in the US-India trade deal, and selling by foreign portfolio investors (FPIs).
In 2025 so far, the rupee has depreciated by about 4.4-5%. FPIs have sold shares worth Rs 1.48 lakh crore this year, including Rs 4,335 crore in the first two days of December. On Tuesday, FIIs offloaded equities worth Rs 3,642.30 crore. A private bank dealer said, "Everyone was talking about 90, but no one expected it to happen so easily. No one knows where it will go from here."
The Reserve Bank of India (RBI) sold dollars to curb the decline, but intervention was limited. Anindya Banerjee of Kotak Securities said, "Lingering uncertainty over the Indo-US trade deal is keeping sentiments fragile. FPI outflow from equities and early signs of Japanese yen carry trade unwinding are putting pressure on the rupee." Madan Sabnavis of Bank of Baroda noted it would help exporters marginally but harm importers and fuel inflation.
The slide raised hedging costs, with the one-year USD/INR forward premium up 7 basis points. The India-US 10-year yield spread widened to nearly 250 basis points. Oil imports, meeting 80% of needs, will become costlier, potentially hiking petrol-diesel prices and transportation costs. The RBI's monetary policy announcement on December 5 may provide clarity on stabilization. Experts predict the rupee could hit 91, though a post-policy correction to 88-89 levels is possible. The dollar index fell 0.13% to 99.22, while Brent crude held steady at $62.43 per barrel.
