Source: TH
Context:
The Indian rupee depreciated beyond the 91 mark against the U.S. dollar during intraday trade, touching 91.14, before closing at 90.93. This marks a fresh all-time low, making the rupee the weakest Asian currency in 2025 and among the weakest globally this year.
Factors Driving Rupee Weakness
| Factor | Details / Impact |
|---|---|
| Trade & Geopolitical Uncertainty | – Uncertainty over India–U.S. trade deal affecting investor sentiment. – Global trade tensions increasing risk aversion in financial markets. |
| Capital Outflows | – FPIs withdrew ~$2.7 billion in first two weeks of December. – One of the largest monthly outflows of 2025, pressuring the rupee. |
| Global Macro Pressures | – Rising U.S. bond yields and expected Bank of Japan rate hike triggering yen carry trade unwinding. – Leads to sell-off in emerging-market assets, including the rupee. |
RBI’s Stance and Policy Interpretation
Limited Intervention
- Experts suggest the RBI’s restrained intervention appears deliberate rather than reactive.
- With India’s growth strong and inflation under control, policymakers may be comfortable allowing gradual depreciation.
Strategic Considerations
- A weaker rupee can support export competitiveness, especially in a trade-war environment.
- Economists note that the RBI is allowing the currency to adjust within limits, rather than defend a fixed level aggressively.
Past Policy Legacy
- Analysts argue that earlier attempts to keep the rupee tightly pegged (around ₹83 per dollar) have constrained flexibility and contributed to current pressures.
