Indian Rupee Breaches Historic ₹90/$ Level as Trade Deficit Explodes and Capital Flight Intensifies

Mumbai – 3 December 2025 – The Indian rupee collapsed to an all-time low on Wednesday, crossing the psychological barrier of 90 per US dollar for the first time in history before closing at 90.27, marking its seventh consecutive day of losses.

The currency touched an intra-day low of 90.32 amid relentless dollar buying by importers and accelerating foreign portfolio outflows. Year-to-date, the rupee has depreciated more than 5.2%, making it the worst-performing Asian currency in 2025.

Perfect Storm Driving the Slide
Several converging factors have hammered the rupee:

Record Trade Deficit: India posted a merchandise trade deficit of $41.68 billion in October, the highest on record, driven by surging imports of crude oil, gold, electronics, and coal.

FPI Exodus: Foreign investors have withdrawn approximately $17 billion from Indian equities and debt markets this year, triggered by stalled India-US trade talks and fears of steep US tariffs on Indian exports under a potential second Trump administration.

Global Dollar Strength: A resurgent US Dollar Index, bolstered by expectations of sustained higher US interest rates and safe-haven flows, has crushed emerging-market currencies.

Export Slowdown: Shipments to the United States, India’s largest export market, fell 8.6% in October, further widening the current-account gap.

RBI Faces Critical Test at This Week’s Policy Meeting

The Reserve Bank of India’s Monetary Policy Committee began its three-day meeting today, with the decision scheduled for announcement on Friday. Markets are divided:

Some economists anticipate a 25-basis-point rate cut to support growth and attract fresh capital inflows.
Others expect the central bank to hold rates steady and prioritize currency defense, potentially through further dollar sales from its $710 billion forex reserves.

“Breaching 90 is largely a reflection of supply-demand imbalance rather than a fundamental shift, but the psychological impact is undeniable,” said Sakshi Gupta, principal economist at HDFC Bank. “The RBI will likely tolerate gradual depreciation but draw a line near 90.50-90.75 in the near term.”

Broader Implications for Emerging Markets

India’s currency turmoil comes against a backdrop of renewed pressure on emerging-market assets. Higher-for-longer US rates, commodity price volatility, and geopolitical uncertainty have triggered capital flight across Asia and Latin America. The Philippine peso, Indonesian rupiah, and South African rand have also hit multi-month or all-time lows in recent weeks.

Despite the sharp depreciation, analysts note that India’s underlying external position remains relatively resilient, supported by robust services exports, steady remittance inflows, and a manageable current-account deficit projected below 2% of GDP for FY2025-26.

For now, the breach of ₹90/$ stands as a stark reminder of the challenges facing one of the world’s fastest-growing major economies as it navigates an unforgiving global financial environment.