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Rupee Falls to Historic INR90/US$ Level Amid Global Risk-Off

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  Published in Business and Finance on Wednesday, December 3rd 2025 at 1:28 GMT by Zee Business

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Rupee Hits Historic Low of ₹90/US$ Amid Global Risk‑Off and Domestic Headwinds

On the morning of May 24, 2024, the Indian rupee slid past the ₹90‑per‑US$ threshold for the first time since 2015, setting a new 6‑year low and stirring fresh concerns among investors, policymakers and consumers. According to the latest data from the Reserve Bank of India (RBI), the rupee closed at ₹90.04 on the day, down roughly 0.6 % from the previous session. The fall was swift and steep, reflecting a confluence of global market turbulence, domestic inflationary pressures, and the Indian government’s fiscal stance.

Why the Rupee Slid

1. Rising U.S. Treasury Yields & Fed “High‑For‑Long” Outlook
The U.S. Federal Reserve’s March 20 policy meeting saw the Fed maintain a “high‑for‑long” stance on interest rates, citing persistent inflation. U.S. Treasury yields climbed to their highest level in over a year, with the 10‑year yield nudging past 4.9 %. The higher yields attracted capital toward U.S. assets, drawing capital out of emerging markets, including India. The rupee, already trading at a weaker 90.00 range for several days, found additional support for depreciation in this risk‑off environment.

2. Global Risk‑Off Sentiment & Equity Market Declines
World equity indices posted declines on the day of the rupee’s fall—S&P 500 down 1.2 %, Nikkei 225 down 0.9 %, and the MSCI Emerging Markets Index down 1.3 %. A “flight to quality” flow saw money moving from emerging‑market currencies and equities into safer U.S. Treasuries and the U.S. dollar. This macro‑environment intensified downward pressure on the rupee.

3. Domestic Inflationary Pressures
India’s inflation remained stubbornly high. The Consumer Price Index (CPI) for April rose 7.3 % year‑on‑year, the highest level since the 2009–10 fiscal year, fueled by sharp increases in food, oil, and services prices. The inflation data kept the RBI’s policy rate— the repo rate at 6.75 %— in a hold stance, while the central bank continued to monitor the trade‑deficit‑driven pressure on the currency.

4. Fiscal Deficit & Debt Concerns
The Indian government’s fiscal deficit for FY 2024–25 was projected at 9.6 % of GDP— the highest level in a decade. Analysts argued that a large deficit could dampen the rupee’s resilience. Coupled with an expanding public debt that has now crossed 80 % of GDP, market participants warned that fiscal discipline could become a critical lever for the RBI in the months to come.

RBI’s Reaction and Future Outlook

In a statement issued on May 25, the RBI highlighted that the rupee had remained within the “expected range” and that the bank was monitoring the situation closely. The RBI emphasized its policy framework, noting that the repo rate was being maintained at 6.75 % and that any future policy shift would be decided only after a thorough assessment of the macro‑economic data.

Monetary Policy Stance
While the RBI has refrained from cutting rates amid inflation concerns, some economists argue that a mild tightening may be warranted to curb import‑driven inflation. A more aggressive stance, however, could hurt growth by raising borrowing costs.

Exchange Rate Strategy
The RBI has traditionally used its foreign‑exchange reserves to intervene in the market, providing support to the rupee during sharp swings. While the central bank has not yet announced a specific intervention, it remains poised to act if the rupee’s depreciation threatens to breach key psychological levels or disrupt the macro‑economic environment.

Impact on Economy and Consumers

Inflation and Import Costs
A weaker rupee translates into higher import costs. Since India is a large importer of crude oil, petroleum products, and raw materials, the depreciation will feed upward into consumer prices. This is particularly concerning for the grocery sector and the transport industry, where price volatility is already a pain point for households.

Export Competitiveness
On the flip side, a weaker rupee improves the price competitiveness of Indian exports. Many export‑oriented sectors—including textiles, pharmaceuticals, and information technology—are likely to benefit from reduced cost‑of‑doing‑business and higher demand from foreign buyers.

Capital Market Sentiment
The rupee’s slump coincided with a sell‑off in Indian equities, as seen on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Several large‑cap stocks fell by 1–2 % on the day, while smaller caps experienced deeper declines. Market participants are wary of a “twin‑shock” scenario, where a weak currency exacerbates equity risk.

Historical Context and Comparisons

The rupee’s breaching of the ₹90 barrier is the most significant decline since November 2015, when it touched ₹91.80. In the past six years, the rupee has largely trended higher, buoyed by robust GDP growth, a relatively disciplined fiscal policy, and a favourable trade balance. The current decline is, therefore, a stark reminder of the delicate balance between domestic fundamentals and global macro‑economic forces.

The rupee’s decline also mirrors a broader trend in emerging‑market currencies, where many are experiencing downward pressure due to a U.S. policy shift and a tightening of global liquidity.

What to Watch Ahead

1. U.S. Fed Minutes – The forthcoming minutes will clarify whether the Fed is truly “high‑for‑long” or open to eventual cuts, affecting global risk sentiment.
2. India’s Fiscal Outlook – The RBI’s Fiscal Policy Committee meeting, scheduled for the end of the month, will outline the path forward for deficit management.
3. Inflation Data – CPI releases for the next month will gauge whether the RBI may have to adjust its stance.
4. Currency Interventions – Any significant RBI intervention could stabilize the rupee temporarily but may have longer‑term implications for reserves and capital flows.

Bottom Line

The rupee’s historic plunge to ₹90.04 per US$ is a snapshot of a complex interplay between global macro‑economic shocks and domestic policy decisions. While the RBI remains cautious, the rupee’s trajectory will hinge on whether global risk‑off sentiment subsides and whether India can manage its fiscal deficit and inflationary pressures without resorting to drastic monetary tightening. For investors and policymakers alike, the next few weeks will be a critical barometer of India’s economic resilience in an increasingly volatile global environment.