Rupee breaches 91 level, turns weakest Asian currency in '25

The Hindu: - Published on 17 December 2025

Why in News?

In December 2025, the Indian Rupee breached the ₹91 per US dollar mark during intraday trade, touching ₹91.14, making it the weakest Asian currency in 2025. Though it recovered slightly to close at ₹90.93, it marked a fresh all-time low, reflecting sustained pressure on the currency.

What is Rupee Depreciation?

Rupee depreciation refers to a decline in the value of the Indian Rupee (INR) against foreign currencies, especially the US Dollar, meaning more rupees are required to buy one unit of foreign currency. The exchange rate is the price of one currency in terms of another.

Key Reasons Behind the Recent Fall

1. Capital Outflows

• Foreign Portfolio Investors (FPIs) withdrew nearly $2.7 billion in early December.
• Such outflows reduce dollar inflows, weakening the rupee.

2. Global Macroeconomic Pressures

• Rising US bond yields and expectations of a Bank of Japan rate hike triggered unwinding of the yen carry trade.
• Increased risk aversion impacted emerging market currencies, including INR.

3. Trade and Geopolitical Uncertainty

• Uncertainty around the India–US trade deal and a broader global trade-war environment affected market sentiment.

4. RBI’s Calibrated Approach

• Experts suggest the RBI has allowed limited depreciation deliberately, given strong domestic growth and contained inflation.
• A moderately weaker rupee may help boost export competitiveness.

Impact of Rupee Depreciation

Positive Effects

• Enhances export competitiveness.
• Benefits IT, pharmaceuticals, and export-oriented sectors.
• Increases rupee value of remittances from NRIs.

Negative Effects

• Raises import costs, especially crude oil and fertilisers.
• Leads to imported inflation.
• Increases burden of external debt servicing.
• May discourage foreign investment if volatility persists.

Way Forward

Short-Term Measures

• RBI intervention via dollar sales.
• Currency swap agreements.
• Monetary tightening to attract foreign capital.
• Rationalisation of non-essential imports.

Long-Term Measures

• Export promotion to reduce current account deficit (Rangarajan Committee, 1993).
• Diversifying trade settlements, including greater use of INR (Economic Survey 2022–23).
• Strengthening FTAs and ease of doing business.
• Ensuring fiscal prudence, inflation control, and reducing energy import dependence.

Conclusion

A controlled depreciation of the rupee can aid exports and growth, but excessive volatility poses macroeconomic risks. A balanced approach combining market mechanisms with timely RBI intervention is essential to maintain currency stability.