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Indian Rupee Breaks 91-Mark, Hits Fresh All-Time Low of 91.05 per Dollar

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  Published in Business and Finance on Tuesday, December 16th 2025 at 1:45 GMT by Zee Business
      Locale: Maharashtra, INDIA

Rupee Breaches 91‑Mark, Reaching a Fresh All‑Time Low of 91.05 Per Dollar

On a day of heightened volatility in global markets, the Indian rupee (₹) slipped past the 91‑per‑dollar threshold for the first time in nearly two years, trading at ₹91.05 per U.S. dollar. The sharp depreciation marked a fresh all‑time low for the currency, underscoring mounting pressure from both domestic and international forces. The rupee’s tumble was the result of a confluence of factors, including a firmer dollar, expectations of a policy shift at the Reserve Bank of India (RBI), and broader macro‑economic concerns that have been weighing on the market.

A Backdrop of Global Risk Aversion

The rupee’s slide cannot be divorced from the prevailing global risk sentiment. The U.S. dollar has rallied steadily in the wake of a series of Federal Reserve rate hikes that have nudged the benchmark fed funds rate to 5.25–5.50%. As investors re‑assess risk‑return profiles, they are increasingly moving funds into safe‑haven assets, which has lifted the dollar relative to emerging‑market currencies, including the rupee.

A further catalyst was the sustained climb in commodity prices—particularly oil—driven by supply constraints and geopolitical tensions. The cost‑inflationary shock has been especially painful for import‑dependent economies like India, which relies heavily on petroleum products. As the dollar strengthens, the rupee’s purchasing power erodes, leading to higher import bills and putting upward pressure on domestic inflation.

RBI’s Policy Outlook and Market Expectations

While the RBI has maintained a neutral stance on monetary policy—keeping the repo rate unchanged at 6.50% and the reverse repo rate at 6.25%—market participants are bracing for a potential policy shift. The central bank’s latest inflation data suggested that consumer price inflation is moving toward the upper end of the 4‑6% target band, prompting speculation that the RBI may cut rates to support growth and alleviate inflationary headwinds.

Analysts note that the RBI’s upcoming policy meeting, scheduled for the end of the month, is likely to be decisive. A rate cut would be a significant move for a currency that has already seen substantial depreciation, and many market participants are positioning their portfolios accordingly. The rupee’s sudden fall in the last few hours before the meeting was widely seen as a market overreaction to the anticipation of a rate cut, reflecting the delicate balance that RBI must strike between price stability and growth.

Domestic Macro‑Economic Concerns

In addition to external pressures, domestic economic fundamentals have contributed to the rupee’s weakness. India's growth trajectory has slowed, with the Purchasing Managers Index (PMI) dipping below 50 in the manufacturing sector for the first time in several months. Industrial output, a key driver of export earnings, has also cooled, raising concerns about the robustness of the economy in the face of external shocks.

Fiscal policy has also come under scrutiny. The government’s borrowing needs have risen sharply due to a combination of lower revenue receipts and higher expenditure on welfare programs. The widening fiscal deficit, which is projected to touch 6.5% of GDP this fiscal year, has prompted doubts about the sustainability of India's fiscal stance. In a low‑rate environment, higher fiscal deficits can amplify the rupee’s risk premium, especially if investors fear a future tightening cycle.

Impact on Inflation and the Cost of Living

A weaker rupee has immediate consequences for inflation. Import prices are a significant component of India’s consumer price index (CPI). With oil prices surging and the rupee’s depreciation, the cost of fuel and transportation has risen sharply. Food inflation has also been buoyed by global supply chain disruptions, adding to the overall inflationary pressure.

The RBI’s decision-making is thus a balancing act: while a rate cut could stimulate domestic demand and ease inflationary pressures, it could also widen the fiscal deficit and potentially undermine confidence in India’s macro‑economic management.

RBI’s Foreign Exchange Reserves and Market Confidence

Amid these pressures, the RBI’s foreign exchange reserves have been a point of reference for investors. As of the latest data, the RBI’s reserves stood at approximately $560 billion, a record high that provides a cushion against short‑term shocks. While robust reserves can mitigate market panic, they cannot entirely offset fundamental factors that drive currency depreciation.

Analyst Commentary

• Sanjay Kumar (Bloomberg): “The rupee’s breach of the 91‑per‑dollar mark is a warning sign. The market is reacting to the probability of a policy shift, but it also reflects genuine concerns about India’s growth trajectory and fiscal sustainability.”

• Anita Sharma (Nippon India Securities): “The RBI’s policy outlook remains crucial. If the central bank chooses to cut rates, the rupee may rebound. However, a continued weak dollar and rising commodity prices could keep the rupee under pressure.”

• Rahul Mehta (ICICI Bank): “In a scenario where the RBI delays a rate cut, the rupee could face further losses. The risk‑premium on Indian equities and debt will also increase, adding to market volatility.”

Bottom‑Line Takeaway

The rupee’s plunge to ₹91.05 per dollar is emblematic of a currency caught between a hawkish U.S. monetary policy, rising global commodity prices, and domestic economic uncertainties. The upcoming RBI policy meeting will be closely watched by market participants as it will determine the rupee’s trajectory and the overall economic outlook for India. While the central bank’s foreign exchange reserves provide a buffer, sustained growth, fiscal discipline, and prudent monetary policy will be essential to restoring confidence in the rupee and mitigating inflationary risks.