【India】Rupee Hits Record Low on Foreign Outflows and Trade Uncertainty, RBI Intervention Provides Slight Relief

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Editor’s Note

The Indian rupee hit a new record low against the U.S. dollar on Thursday, driven by foreign capital outflows and trade uncertainties. While the Reserve Bank of India intervened to stabilize the currency, the rupee’s decline underscores ongoing pressures in the financial markets.

Rupee vs Dollar
Rupee Plunges to New Low

The Indian rupee closed at a new all-time low of 90.37 per US dollar on Thursday, driven by foreign fund outflows from bonds and equities and uncertainty surrounding a trade deal with the United States. Dealers noted that the rupee touched a new intra-day low of 90.49 against the dollar, but some losses were recouped after the Reserve Bank of India (RBI) intervened in the foreign exchange market by selling dollars just before market close.

Last week, on December 3, the rupee had closed at 90.20 per dollar, which was then the all-time low. Today, the rupee fell by 0.45 percent. This year, the rupee has been the worst-performing currency in Asia, depreciating by 5.26 percent against the dollar.

Dealer Insights on Market Pressure
“There was some outflow and stop-loss selling had begun,” said a dealer at a public sector bank.

He added,

“Around noon, some comments from a government official that a trade deal would be finalized by the end of March accelerated the decline. The market had expected the trade deal to be finalized by December.”

Chief Economic Adviser (CEA) V. Anantha Nageswaran said on Thursday that India and the US have resolved “most of their long-pending differences” on a trade deal, and a formal agreement could be reached by March 2026. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors, said,

“The CEA’s statement that the trade deal could happen by March-2025 has increased uncertainty in the market. Additionally, Mexico has imposed tariffs of up to 50 percent on goods arriving from Asia, including India.”
RBI Intervention and Future Outlook

Market participants said stop-loss selling had begun at the 90.25 per dollar level. They noted that the RBI’s intervention was modest, which has been the trend for the past few weeks. The central bank has likely reduced its net short position in forwards, which had increased in September and October. This has led to increased volatility in the forex market.

“If outflows continue, the rupee could trade towards 91 per dollar in the near future,” said a dealer at a private bank.

He added,

“The next level is seen at 90.65 per dollar; if we break that, we could soon touch 91 per dollar.”
Bond Market and RBI Operations

Meanwhile, the Reserve Bank accepted government bonds at yields 2 to 3 basis points below prevailing market rates in its Open Market Operation (OMO) purchase auction, helping lower yields across tenures. The RBI received bids worth Rs 1.1 lakh crore against a notified amount of Rs 50,000 crore for the OMO purchase auction. The yield on the 10-year government bond closed at 6.58 percent compared to the previous close of 6.63 percent.

“The OMO auction was successful. The RBI accepted bonds at 2-3 bps below market levels, so we saw a rally after the results,” said a dealer at a primary dealership.

He further said,

“The next cue will come from tomorrow’s (Friday’s) auction and the CPI data.”

The RBI will sell government bonds worth Rs 28,000 crore in its weekly auction tomorrow.

The central bank had also announced liquidity measures through Open Market Operations and a forex buy/sell swap. The OMOs will involve the purchase of Government of India securities worth Rs 1 lakh crore in two tranches of Rs 50,000 crore each. The second auction is scheduled for December 18. Additionally, a $5 billion dollar/rupee buy/sell swap for three years is also to be conducted on December 16.

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⏰ Published on: December 11, 2025