MUMBAI, India — The Indian rupee sank to a record low beyond 91 to the U.S. dollar this week as punishing U.S. tariffs and a stalled U.S.-India trade deal intensified hedging demand and extended a monthslong retreat in foreign investment. The Reserve Bank of India intervened to curb the slide, but money managers say sentiment may not turn until there is clarity on tariff relief and a negotiating calendar now stretching toward March 2026, Dec. 17, 2025.
The rupee breached the 91-per-dollar threshold for the first time Tuesday, slipping 0.3% to 91.0750 and logging a fourth consecutive record-low session, according to a Reuters report. The currency is down more than 6% for 2025 and is off about 8.5% from its year-to-date high in May, the report said.
State-run banks likely acting for the RBI sold dollars to slow the decline, traders said. The central bank’s pushback became more visible Wednesday, when the rupee rallied about 0.7% to roughly 90.25 after opening near 91.07, Reuters reported.
Indian rupee at record lows: what is pushing it down
Investors and analysts point first to the hit from U.S. tariffs that have climbed as high as 50% on Indian goods, and second to the lack of a near-term breakthrough in trade negotiations. The combination has weighed on export-sensitive sectors, increased corporate demand for dollars and made foreign investors more cautious about keeping rupee exposure unhedged.
Overseas investors have net sold more than $18 billion of Indian equities so far this year, putting 2025 on track for the largest annual outflow on record, traders and analysts said. A weaker currency can help soften tariff pain by lowering dollar prices for exports, but many economists argue the current levies are too steep for exchange-rate moves alone to offset.
Even measures that typically signal a currency is “cheap” are not yet luring investors back in. Citi estimates India’s real effective exchange rate has fallen to its weakest level in more than a decade, but outflows have continued as markets wait for political and policy clarity.
“I think the market’s patience in general is running thin,” Vivek Rajpal, an Asia macro strategist at JB Drax Honore, said in comments cited in a Reuters analysis of how tariffs are reshaping investor positioning.
Why March 2026 is becoming the market’s line in the sand
Officials in both capitals have spent much of 2025 in talks, but investors are increasingly treating March 2026 as the earliest realistic window for a deal that could reset tariffs. India’s chief economic adviser said in a Bloomberg interview cited by Reuters that he expects an agreement by March 2026, and fund managers told Reuters they are unlikely to rebuild rupee exposure aggressively without firmer signs of progress.
That timeline matters because foreign exchange markets trade expectations as much as outcomes. A longer runway for negotiations can mean a longer period of risk premiums in the currency, especially when the tariff regime is already constraining corporate earnings visibility and cross-border flows.
Trade data offers a bright spot — but not a turning point
India’s trade picture has shown some resilience, which may reduce the urgency for New Delhi to accept a quick compromise. A government release reported November merchandise exports of $38.13 billion and imports of $62.66 billion, implying a goods trade deficit of about $24.53 billion — a sharp narrowing from October’s blowout gap, according to Commerce Ministry data published by the Press Information Bureau.
Exports to the United States rebounded in November, helping stabilize the broader external account at a time when tariffs and outflows have been a drag on the currency. Still, traders said the improved trade numbers have provided only fleeting relief because the rupee’s immediate pressure has been driven by capital flows and hedging demand rather than a sudden deterioration in domestic activity.
RBI intervention can slow the fall, not erase the forces behind it
Market participants said the RBI’s actions suggest it is focused on smoothing volatility and preventing disorderly moves — especially during periods of one-way positioning — rather than defending a fixed line in the sand. In that framework, the central bank can lean against sharp intraday swings while allowing the exchange rate to adjust to sustained trade and capital-flow shocks.
Independent benchmark data show how quickly the rupee’s levels have shifted in December. The Federal Reserve’s H.10 weekly exchange rates put the rupee around 90 per dollar in the week ending Dec. 12, before the latest slide took the currency through 91 and forced more active RBI intervention.
Past rupee slides show how quickly “record lows” can become a pattern
The current move is sharp, but not unprecedented in its pattern: a mix of global risk shocks, widening deficits and capital outflows. In the 2013 episode often tied to global capital flight from emerging markets, the currency fell to a then-record low near 68.75 per dollar, as described in Al Jazeera’s August 2013 coverage.
Five years later, the rupee slid again as crude prices and dollar strength rose, closing at a record low of 74.39 in October 2018, according to The Indian Express report from that period.
More recently, the rupee hit a record low of 83.06 in October 2022 amid a stronger greenback and persistent outflows, The New Indian Express reported.
What happens next
For now, traders and investors are watching three near-term signposts:
Any movement in U.S.-India trade negotiations, including signals that tariffs could be reduced or phased down before March 2026.
The pace of foreign portfolio flows into and out of Indian equities and bonds as the currency weakens.
The RBI’s tolerance for volatility, especially if the rupee resumes a one-way slide and hedging demand accelerates.
Until one of those factors shifts decisively, the rupee’s record low may stand less as a single milestone and more as a marker of how tariffs, stalled talks and capital outflows are feeding into each other — with March 2026 now emerging as the market’s unofficial deadline for a reset.
