Rupee over 90: RBI adopts flexible stance as rupee weakens amid reduced foreign inflows
The rupee’s slide to a record 90.42 against the dollar marks a clear shift in the RBI’s currency strategy. With foreign inflows weakening and trade tensions rising, the central bank is now prioritising volatility control over defending any level. India’s worst-performing Asian currency this year, the rupee faces pressure until global and bilateral uncertainties ease.
- Dec 4, 2025,
- Updated Dec 4, 2025 1:12 PM IST
The Reserve Bank of India (RBI) appears to have shifted its approach to managing the rupee, allowing a more flexible exchange rate as foreign inflows weaken and the trade deficit expands. Over the last seven trading sessions, the rupee has depreciated 1.3%, touching a historic low of 90.42 per US dollar. The currency is now down 5.5% year-on-year, making it Asia’s worst performer and signalling that the central bank is no longer defending any specific level.
According to officials quoted by Reuters, the RBI is now intervening primarily to curb volatility and prevent speculative positions from building up, rather than to hold the currency at a particular threshold. This change coincides with heavy foreign selling—investors have offloaded nearly $17 billion in equities since the start of the year—while FDI and offshore fundraising have also slowed noticeably. Another official noted that the “central bank does let the rupee move more than it normally would,” especially when real demand for dollars rises on the back of trade-related pressures.
Interestingly, the currency’s weakness contrasts with India’s strong macroeconomic backdrop. GDP expanded 8.2% in the July–September quarter, and Chief Economic Advisor V. Anantha Nageswaran expressed confidence that the rupee’s slide poses no immediate threat. “I’m not losing sleep over it,” he said, stressing that the depreciation has not fed into inflation and that he expects a recovery in 2026. Even so, the RBI remains ready to counter sharp speculation and preserve orderly market conditions.
For global investors, however, the depreciation introduces fresh uncertainty. Sam Kongrad, investment manager for Asian equities at Jupiter Asset Management, said the weakening currency is “definitely a negative” for foreign equity inflows and one reason his firm maintains only a neutral weighting on India. Kenneth Akintewe of Aberdeen Investments emphasised that a resolution to the US–India tariff standoff is now critical, noting that upcoming global index inclusion-linked flows will also be essential to boost confidence.
Rupee at 90 and the road to recovery
The rupee’s slide deepened on December 4 as it opened at a fresh low of 90.41, driven by stalled progress on the Indo–US trade deal and persistent equity outflows. The prolonged uncertainty around the agreement has strengthened the US dollar’s position while dampening sentiment across emerging-market currencies, including India’s.
Traders note that the breach of the 90 level triggered a wave of stop-loss orders from leveraged market participants and option sellers who had been defending that mark. Once that threshold fell, automated selling amplified the downward pressure. At the same time, strong dollar demand from import-heavy sectors like oil, metals, and electronics further drained liquidity and accelerated the rupee’s decline.
With over 5% depreciation this year—compounded by steep US tariffs of up to 50% on Indian exports—the rupee remains one of Asia’s weakest currencies. Still, analysts believe that a recovery could begin once trade uncertainties ease, global risk appetite improves, and foreign capital flows regain momentum.
The Reserve Bank of India (RBI) appears to have shifted its approach to managing the rupee, allowing a more flexible exchange rate as foreign inflows weaken and the trade deficit expands. Over the last seven trading sessions, the rupee has depreciated 1.3%, touching a historic low of 90.42 per US dollar. The currency is now down 5.5% year-on-year, making it Asia’s worst performer and signalling that the central bank is no longer defending any specific level.
According to officials quoted by Reuters, the RBI is now intervening primarily to curb volatility and prevent speculative positions from building up, rather than to hold the currency at a particular threshold. This change coincides with heavy foreign selling—investors have offloaded nearly $17 billion in equities since the start of the year—while FDI and offshore fundraising have also slowed noticeably. Another official noted that the “central bank does let the rupee move more than it normally would,” especially when real demand for dollars rises on the back of trade-related pressures.
Interestingly, the currency’s weakness contrasts with India’s strong macroeconomic backdrop. GDP expanded 8.2% in the July–September quarter, and Chief Economic Advisor V. Anantha Nageswaran expressed confidence that the rupee’s slide poses no immediate threat. “I’m not losing sleep over it,” he said, stressing that the depreciation has not fed into inflation and that he expects a recovery in 2026. Even so, the RBI remains ready to counter sharp speculation and preserve orderly market conditions.
For global investors, however, the depreciation introduces fresh uncertainty. Sam Kongrad, investment manager for Asian equities at Jupiter Asset Management, said the weakening currency is “definitely a negative” for foreign equity inflows and one reason his firm maintains only a neutral weighting on India. Kenneth Akintewe of Aberdeen Investments emphasised that a resolution to the US–India tariff standoff is now critical, noting that upcoming global index inclusion-linked flows will also be essential to boost confidence.
Rupee at 90 and the road to recovery
The rupee’s slide deepened on December 4 as it opened at a fresh low of 90.41, driven by stalled progress on the Indo–US trade deal and persistent equity outflows. The prolonged uncertainty around the agreement has strengthened the US dollar’s position while dampening sentiment across emerging-market currencies, including India’s.
Traders note that the breach of the 90 level triggered a wave of stop-loss orders from leveraged market participants and option sellers who had been defending that mark. Once that threshold fell, automated selling amplified the downward pressure. At the same time, strong dollar demand from import-heavy sectors like oil, metals, and electronics further drained liquidity and accelerated the rupee’s decline.
With over 5% depreciation this year—compounded by steep US tariffs of up to 50% on Indian exports—the rupee remains one of Asia’s weakest currencies. Still, analysts believe that a recovery could begin once trade uncertainties ease, global risk appetite improves, and foreign capital flows regain momentum.