Rupee's Historic Plunge: Currency Breaches 90-Per-Dollar Mark for First Time, Falls 6 Paise in Early Trade Amid US Trade Tensions & FPI Exodus
December 3, 2025 | Currency Crisis | India's Economy Under Pressure
By Currency & Macro-Economics Correspondent
Forex Markets & RBI Policy Analyst
Focus: Currency trends, capital flows, monetary policy, economic impact
On Wednesday, December 3, 2025, the Indian rupee hit a historic record low of 90.16 against the US dollar for the first time ever, falling 6 paise in early trade amid massive FPI outflows, stalled US-India trade talks, and a strengthening dollar.
In a historic milestone, the Indian rupee breached the 90-per-dollar mark for the first time ever on Wednesday, December 3, 2025, marking a critical psychological and technical threshold that has spooked investors and economists alike. The rupee fell 6 paise to 90.02 in early trade after opening at 89.96, eventually hitting an intra-day low of 90.16 before recovering slightly to 90.12 by mid-morning. This represents the sixth consecutive day of depreciation for the Indian currency and extends an alarming pattern of weakness that has cost the rupee approximately 4.51% of its value in 2025 alone[web:50][web:51][web:53][web:54].
The breach of the 90-mark comes amid a perfect storm of negative factors: foreign portfolio investor (FPI) outflows of Rs 1.48 lakh crore (roughly $17.5 billion USD) in calendar year 2025—the worst on record for any calendar year; stalled India-US trade deal negotiations that have frustrated markets expecting concrete tariff reductions; and rising US tariffs on Indian goods, including 50% duties on select exports. While a weaker dollar index globally and falling crude oil prices cushioned the rupee against an even sharper decline, analysts warn the currency could plunge to 91 within weeks if the Reserve Bank of India does not step in with decisive intervention[web:50][web:51][web:53][web:56][web:57].
The breach of the 90-mark comes amid a perfect storm of negative factors: foreign portfolio investor (FPI) outflows of Rs 1.48 lakh crore (roughly $17.5 billion USD) in calendar year 2025—the worst on record for any calendar year; stalled India-US trade deal negotiations that have frustrated markets expecting concrete tariff reductions; and rising US tariffs on Indian goods, including 50% duties on select exports. While a weaker dollar index globally and falling crude oil prices cushioned the rupee against an even sharper decline, analysts warn the currency could plunge to 91 within weeks if the Reserve Bank of India does not step in with decisive intervention[web:50][web:51][web:53][web:56][web:57].
The Historic Breach: 90 Is Not Just a Number
📉 Why 90 Matters: Psychological & Technical Significance
- Psychological Barrier: The 90-mark represents the most important psychological level for India's currency. It's a "round number" that traders have been nervously watching for months as the rupee approached from 88-89 levels
- Technical Barrier: Analysts note that a major cluster of "buy-stop orders" sits above the 90 level, meaning once it was breached, automated trading algorithms triggered additional selling, accelerating the decline
- Market Confidence Signal: Breaching 90 signals to markets that the RBI may no longer be actively defending this level, potentially opening the floodgates to further depreciation toward 91 and beyond
- Historical Journey: The rupee was under Rs 4 to the dollar in 1947; reached Rs 50 in 1990; hit Rs 70 in 2018; touched Rs 84.8 in 2024; and now has breached 90 in December 2025—representing a 50+ year depreciation trajectory
- Rate of Decline Acceleration: The currency fell 4.5% in 2025 vs. the historical 25-year average depreciation of just 3% per annum, indicating an unprecedented pace of weakness[web:50][web:57][web:65]
⏰ The Timeline: How the Rupee Fell from 88 to 90
- September 2025: Rupee trading around 88.50 levels; RBI defending 88.80 level aggressively for several weeks
- November 2025: Once RBI defense at 88.80 breached, selling accelerated rapidly. Rupee fell 0.8% in November alone
- December 1-2 (Mon-Tue): Currency tumbles 42 paise; closes at record low 89.95 on Tuesday (Dec 2)
- December 3 (Wed) Early Trade: Rupee breaches 90-mark for first time in history; hits intra-day low of 90.16
- RBI Intervention Pattern: RBI intervened at 89.90 levels on Tuesday but intervention was "mild" and did not reverse the trend[web:50][web:54][web:67]
💹 Market Reaction & Expert Commentary
- Shock Among Traders: Despite weeks of pressure building, the actual breach shocked many market participants who thought RBI would defend more aggressively
- Kotak Securities (Anindya Banerjee): "The 90 level is a major psychological barrier with a cluster of buy-stop orders. RBI must remain active below 90; if USD/INR sustains above 90, market could shift toward 91 or higher"[web:50][web:64]
- LKP Securities (Jateen Trivedi): "Rupee deeply oversold technically; move back above 89.80 essential for meaningful recovery. Muted RBI intervention contributed to swift depreciation"[web:50][web:59]
- Union Bank of India: Forecasts rupee may gradually drift toward 91 by March 2026 if trade deal remains stalled
- Reuters Sources: "Rupee's slip below 88.80 stripped away the psychological anchor; currency now more vulnerable to speculation"[web:68]
Root Causes: US Trade Deal Limbo, FPI Exodus, & US Tariff War
1. The Stalled India-US Trade Deal: Concrete Expectations Shattered
- Original Optimism: In April 2025, US and Indian officials announced that the India-US trade deal would be finalized, with expectations that steep US tariffs on Indian goods (reaching 50% on some items) would be reduced significantly
- Current Status: No formal bilateral trade agreement (BTA) has been signed. Negotiations have dragged on with repeated delays in timelines
- Market Frustration: "Markets wanted concrete numbers rather than broad assurances. The absence of a confirmed deal with repeated delays has accelerated rupee selling," according to LKP Securities[web:52][web:64]
- Tariff Uncertainty Persists: Indian exporters remain uncertain about final tariff rates. Some sectors face 50% US duties, undermining export competitiveness and foreign direct investment
- Positive Catalyst Absent: A trade deal would typically strengthen the rupee by attracting investment inflows; its absence removes the key positive factor[web:50][web:52][web:69]
2. Foreign Portfolio Investor (FPI) Exodus: $17.5 Billion in Selling
- Calendar Year 2025 Record: FPIs have sold Rs 1.48 lakh crore (~$17.5 billion USD) of Indian equities in calendar 2025—the worst calendar-year performance on record. This exceeds all previous years
- Accelerating Outflows: In just the first two days of December 2025, FPIs pulled out Rs 4,335 crore; November alone saw Rs 3,765 crore in outflows
- Multiple Drivers: FPI selling driven by: (a) US tariff uncertainty affecting India's export outlook; (b) higher US interest rates making US investments more attractive; (c) yen carry trade unwinding affecting Asian currencies globally; (d) year-end portfolio rebalancing
- Rupee Pressure: When FPIs sell equities, they convert rupees back into foreign currency (primarily USD), creating massive demand for dollars. This currency conversion demand directly weakens the rupee[web:50][web:56][web:63][web:68]
- Vicious Cycle: Rupee weakness → concerns about further depreciation → more FPI selling → additional rupee weakness[web:50][web:51]
3. US Tariff War: India Pays World's Highest US Tariffs
- Tariff Escalation: The US has imposed steep tariffs on Indian goods, with some sectors facing 50% duties—among the highest globally. These tariffs apply to engineering goods, chemicals, textiles, and pharmaceuticals
- Export Competitiveness Hit: Higher US tariffs reduce demand for Indian exports, weakening export earnings and forex inflows. This structural export weakness depresses the rupee
- Trade Deficit Widening: India's merchandise trade deficit reached a record high in October 2025, with imports (driven by oil, commodities, electronics) growing faster than exports
- Global Context: As one portfolio manager noted, "The recent tariff dispute with US has really accelerated the rupee decline. India now pays the highest US tariffs globally, putting pressure on the currency until this is resolved"[web:57]
4. RBI's Muted Intervention: A Philosophical Shift
- Intervention Pattern: Unlike previous currency crises, the RBI has not aggressively defended the rupee. It intervened at 89.90 on Tuesday but did not reverse the weak trend—only halted depreciation temporarily
- Philosophical Shift: International Monetary Fund (IMF) has reclassified India's exchange rate regime from "stabilized" to "crawl-like," suggesting the RBI is now guiding rather than guarding the rupee[web:70]
- Strategic Patience: With Rs 690 billion in forex reserves, the RBI has the firepower to intervene but is choosing a measured approach. The central bank prioritizes long-term resilience over defending specific levels at all costs
- Policy Thinking: Some economists argue that allowing depreciation is natural given India's tariff pressures (which reduce export competitiveness). A weaker rupee acts as a "natural stabilizer" by improving price competitiveness[web:63][web:70]
Economic Impact: How Rupee's Fall Affects Your Life
🛢️ Oil Prices & Inflation
- India Imports 90% of Oil: India depends almost entirely on imported crude oil. A weaker rupee means importing oil costs more rupees. When crude oil is priced in USD and the rupee weakens, petrol/diesel prices rise at pumps
- Cascading Inflation: Higher fuel costs increase transportation costs for goods and services, leading to broad-based inflation across the economy. Food, cement, steel—all become more expensive
- Consumer Purchasing Power: Higher inflation erodes purchasing power of fixed-income households, pensioners, and workers whose salaries don't keep pace
🏡 EMIs & Borrowing Costs
- Import-Linked Inflation: If import costs rise due to rupee weakness, RBI may keep interest rates higher to control inflation. Higher rates mean higher EMIs on home loans, car loans, and other borrowings
- New Loan Applicants: Those applying for loans in a higher-rate environment face higher monthly payments on mortgages and auto loans
- Corporate Borrowing: Companies also face higher borrowing costs, which could reduce investments in expansion and hiring
📱 Imported Electronics & Consumer Goods
- Costlier Imports: Smartphones, laptops, refrigerators, cars, pharmaceuticals—all often contain imported components or are imported entirely. Weak rupee = higher prices for consumers
- Example: If an iPhone costs $1,000 USD, at 89 rupees/dollar it would have cost Rs 89,000. At 90 rupees/dollar, it now costs Rs 90,000—and could cost Rs 91,000 if rupee reaches 91
- Price Stickiness: Companies may delay price reductions even if rupee strengthens (sticky prices downward), but pass through increases immediately when rupee weakens
✈️ Foreign Travel & Education
- Overseas Education Costs Spike: Students studying abroad (especially USA, Canada, UK) find tuition and living costs in USD much more expensive. A student paying $50,000/year USD tuition now pays 5-10 lakh rupees MORE compared to 2023 when rupee was stronger
- Foreign Travel: Vacations, medical tourism, and business travel abroad become costlier in rupees as the currency weakens
- Remittances Positive Effect: Conversely, Indians working abroad and sending remittances benefit—they get more rupees for the same dollar amount (though rupee weakness for remittance recipients is mainly psychological)
💼 Corporate Profits & Export Competitiveness
- Exporters Benefit (Partially): A weaker rupee makes Indian exports more price-competitive globally. Software companies, auto parts manufacturers, textile exporters see improved cost advantage
- Import-Heavy Companies Suffer: Companies relying on imported raw materials (pharmaceuticals, electronics manufacturing) face higher import costs, squeezing profit margins
- External Debt Risk: Companies with USD-denominated debt face higher rupee costs for servicing that debt as the rupee weakens
What Happens Next: RBI Policy Decision on December 5
⏰ Critical Decision: Friday's RBI Monetary Policy Committee Meeting
| Scenario | RBI Action on Rates | Likely Rupee Impact |
|---|---|---|
| Rate Cut (0.25-0.5%) | Lower interest rates reduce USD/INR yield differential; less attractive for foreign investors | Rupee weakens further (toward 91) as carry trade unwinds; negative for currency |
| Hold Rates | RBI maintains status quo; signals confidence but limited intervention | Neutral to slightly supportive; rupee may stabilize if trade deal emerges |
| Aggressive Intervention + Signals | RBI commits to defending rupee; clarifies intervention strategy | Could stabilize rupee and prevent further fall toward 91 |
📊 Expert Forecasts on Rupee Path Forward
- Bank of Baroda: "Markets talking of 91 levels, but we think post-RBI policy there should be correction back to 88-89 levels. But it's guesswork as we crossed Rs 88 mark"
- CRISIL Chief Economist (Dharmakirti Joshi): "I see rupee appreciation around the corner. If you get a trade deal, depreciated rupee will start appreciating. Expectation is rupee will strengthen from these levels in months ahead"[web:52][web:64]
- Union Bank of India: Rupee may gradually drift toward 91 by March 2026 if trade deal stalls; but correction likely post-policy
- YES Securities: "FPIs inflows in equities pick up when rupee depreciation exceeds long-term average. This calendar year's 4.5% depreciation is steeper than 25-year average of 3%. This suggests FIIs may return if depreciation stabilizes"[web:63]
🎯 Key Catalysts for Rupee Recovery
- India-US Trade Deal Announcement: Concrete tariff reductions would be massive positive catalyst, attracting FPI inflows and strengthening rupee
- US Federal Reserve Rate Decision (Dec 10): If Fed signals pause in rate hikes or eventual rate cuts, weaker US dollar globally could help rupee
- RBI Intervention Clarity: Clear communication that RBI will defend 90 level could restore confidence and reverse speculative selling
- FPI Stabilization: If FPI selling pauses and stabilizes, less pressure on rupee from equity outflow-driven currency conversion
- Oil Price Decline: Further fall in global crude oil prices would reduce India's import bill, improving trade deficit and rupee outlook
UPSC & Competitive Exams: Rupee Crisis Topics
UPSC Prelims (Expected Questions)
- Which of the following did NOT contribute to rupee's depreciation in December 2025? (A) US tariffs on Indian goods (B) FPI outflows (C) Strong domestic GDP growth (D) Stalled India-US trade deal
- How many rupees fell against the dollar on December 3, 2025 (early trade)? (A) 3 paise (B) 6 paise (C) 12 paise (D) 18 paise
- What was the record low the rupee touched on December 3? (A) 90.02 (B) 90.08 (C) 90.16 (D) 90.20
- FPI outflows from Indian equities in calendar 2025 totaled approximately: (A) Rs 50,000 crore (B) Rs 1 lakh crore (C) Rs 1.48 lakh crore (D) Rs 2 lakh crore
UPSC Mains (Practice Topics)
- "Analyze the factors contributing to India's rupee depreciation in 2025 and evaluate the RBI's intervention strategy. What are the trade-offs between defending the rupee and allowing market-determined depreciation?" (20 marks)
- "Discuss the macroeconomic implications of persistent rupee weakness on inflation, capital flows, and India's export competitiveness." (15 marks)
- "Examine the role of US-India trade negotiations in determining rupee's trajectory. How important is a trade deal for rupee stability?" (10 marks)
Banking & SSC Exams (GK Topics)
- India's forex reserves stood at approximately: (A) $400 billion (B) $500 billion (C) $690 billion (D) $800 billion
- What percentage depreciation did the rupee experience in calendar year 2025? (A) 2.5% (B) 3.5% (C) 4.51% (D) 6%
- The "crawl-like" exchange rate regime designation means: (A) Currency appreciating slowly (B) Currency depreciating slowly but in controlled manner (C) Currency fixed to dollar (D) Currency floating freely
Current Affairs & Macro Topics
- Exchange Rate Regimes: Fixed, floating, crawling-peg, and managed float; India's regime classification
- Forex Intervention: Central bank's role in currency stabilization vs. market efficiency; sterilization costs
- Capital Account: FPI flows, FDI, NRI deposits; impact on currency demand/supply
- Trade Deficits: Current account deficit implications; import-export dynamics under tariff pressures
- RBI Tools: Intervention operations (spot, forward, repos); interest rate impacts on currency
📝 Key Takeaways for Exam Preparation:
- ✓ Rupee breached 90-mark for first time in history; record low 90.16
- ✓ Primary drivers: FPI exodus ($17.5B), US trade deal delay, tariffs, muted RBI intervention
- ✓ 90-mark is psychological barrier; technical support cluster above it could push rupee to 91
- ✓ RBI's philosophy shift: "crawl-like" regime allowing market-driven depreciation vs. rigid defense
- ✓ Impact on consumers: higher inflation, costlier imports, education abroad more expensive
- ✓ Trade deal crucial catalyst; Dec 5 RBI policy and Dec 10 Fed decision critical for rupee
- ✓ 4.51% depreciation in 2025 vs. historical 3% average—unprecedented pace
Why This Matters: India's Economic Resilience at a Crossroads
- ✓ Macro Fundamentals Solid But External Pressures Severe: Despite strong 6-7% GDP growth and stable inflation, external shocks (tariffs, trade deal delay) overwhelming domestic strength
- ✓ Global Trade Uncertainty: US tariff regimes creating unprecedented export-competitiveness challenges; rupee weakness is market's way of adjusting to new trade reality
- ✓ Capital Flow Volatility: $17.5B FPI outflows in 2025 demonstrate how quickly foreign confidence can evaporate; emerging markets vulnerable to external shocks
- ✓ Policy Trade-offs: RBI choosing between aggressive defense (costly, may deplete reserves faster) vs. allowing controlled depreciation (more efficient but unpopular politically)
- ✓ Household Impact Non-Trivial: Rupee weakness translates to higher inflation, costlier imports, EMI pressure—real impact on ordinary Indians' purchasing power
- ✓ Strategic Response Critical: Trade deal breakthrough would be transformational positive catalyst; continued delay deepens pessimism
- ✓ RBI Credibility Test: How RBI handles rupee stabilization in coming weeks will determine market confidence in central bank's forex management
— End of Report —
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## Key Economic Impact Table
| Impact Area | Effect | Duration |
|---|---|---|
| **Oil & Fuel Prices** | Petrol/diesel costs rise; inflation increases | Medium-long term |
| **EMIs** | Higher interest rates → higher monthly payments | Ongoing |
| **Import Prices** | Electronics, appliances, pharmaceuticals costlier | Medium-long term |
| **Foreign Education** | Overseas fees in USD more expensive | During depreciation |
| **Export Competitiveness** | Improved for exporters (partial benefit) | Medium-long term |
| **Corporate Debt** | Companies with USD debt face higher costs | Ongoing |
| **Inflation Trajectory** | RBI may keep rates higher → impacts all credit | Medium-long term |
## Quick Reference: Historical Rupee Journey
- **1947:** Rs 4 per USD
- **1990:** Rs 50 per USD
- **2018:** Rs 70 per USD
- **2024 Average:** Rs 84.8 per USD
- **December 2, 2025:** Rs 89.95 per USD (close)
- **December 3, 2025:** Rs 90.16 per USD (intra-day low) ← **RECORD LOW**
- Indian Express, Times Now, Deccan Herald, Business Today, ANI, Reuters, Moneycontrol
- Economic Times, India Today, Fortune India, Times of India, Hindustan Times
- Reserve Bank of India official statements and data
- Forex market reports from Kotak Securities, LKP Securities, Mecklai Financial Services, Bank of Baroda
- December 3, 2025
