The Indian rupee has slipped 5.3% in 2025, touching an all-time low of ₹90.28 per dollar on December 3—its sharpest fall since 2022. The currency’s decline has made it Asia’s weakest performer this year, outpacing losses in the yen and yuan.

The slide is driven largely by US-India trade tensions, with Washington imposing tariffs of up to 50% on Indian exports, widening India’s trade deficit to $41.7 billion in October. Additional US penalties on India’s Russian energy and defence ties, as well as proposed hikes in H-1B visa fees, have further shaken investor confidence.

Foreign investors have pulled nearly $17 billion from Indian markets this year, while oil importers and banks continue to buy dollars aggressively amid elevated crude prices. The RBI has already used over $30 billion in forex reserves to curb volatility but has recently slowed interventions, allowing the rupee to slide past key levels.

The depreciation raises import costs and inflation risks, complicating monetary policy. While a weaker rupee can help exporters, economists warn that without stronger global demand and trade stability, the benefits may be limited. India’s challenge now is balancing currency stability with geopolitical and trade pressures that continue to weigh heavily on market sentiment.