Rupee's 90-Mark Shock: What's Driving the Steepest Decline Since 2022 The currency slipped to a record 90.14 against the U.S. dollar, surpassing Tuesday's all-time low of 89.9475.

The Indian rupee tumbled past the 90-per-dollar mark for the first time on Wednesday, extending a relentless slide driven by persistent capital outflows, a widening trade deficit, and weak external balances—even as domestic growth remains among the strongest globally.

The currency slipped to a record 90.14 against the U.S. dollar, surpassing Tuesday's all-time low of 89.9475. It was last trading at 90.07, down 0.22% intraday, marking its sixth straight session of losses and putting it firmly on track to become Asia's worst-performing currency this year.

The depreciating rupee opens up the whole lot of issues not only for the exporters but also for the government. The depreciating rupee can have a huge impact on government finances as well. India buys 75 per cent of its total oil needs, so once rupee depreciates, the import bill rises which leads to imported inflation in the country.

And since the last few months, inflation has been benign and has been hovering in the comfortable band. But depreciating rupee can offset all the gains we made on the inflation front. So this situation might be favourable for exporters but not a good thing for the economy at large.

"I am not losing sleep over it," government chief economic advisor Ananath Nageswaran said on Wednesday. He went on to add that, "It (rupee) will come back next year. Right now, it is not impacting inflation or exports."

Growth Surges, Currency Sags

The rupee's fall highlights a growing disconnect between India's domestic momentum and its external vulnerabilities. India continues to clock robust GDP growth—outperforming most major economies—but the currency market tells a different story.

Punitive U.S. tariffs, weaker global demand for Indian exports, and a sharp slowdown in foreign inflows have clouded the macro outlook. The rupee has already depreciated about 5% year-to-date, making 2025 its steepest annual fall since 2022.

"Until there is a trade deal, this is the sort of economic adjustment that India requires," said Dhiraj Nim, economist and FX strategist at ANZ. The bank expects the rupee to slide further to 91.30 per dollar by end-2026, assuming tariff conditions remain unchanged—warning that the level could come sooner if volatility spikes.

Foreign Investors Head for the Exit

India's capital account pressures have intensified sharply in recent months. Foreign investors have withdrawn over $17 billion from Indian equities so far this year, a sharp reversal from the inflows seen in 2023–24.

Net FDI inflows have stagnated, while external commercial borrowings remain muted, reducing the pipeline of long-term foreign capital that typically supports the rupee.

This exodus comes just as the trade deficit balloons past $40 billion, the highest monthly reading on record. The widening gap has distorted the market's demand-supply balance for dollars, accelerating downward pressure on the currency.

"The weak macro picture in India makes weak currency performance inevitable. There has been a slide in so many data points—rising trade deficits, weakening nominal GDP growth, weak FDI and foreign selling across equities," said Sat Duhra, portfolio manager at Janus Henderson Investors, Singapore.

RBI Opts for Staggered Defence, Not a Firewall

Despite having one of the world's largest forex reserves, the Reserve Bank of India has avoided launching a full-force defence of the currency. According to four senior bankers, the RBI has been intervening in short, staggered bursts, rather than drawing a sharp line to prevent depreciation.

This approach, they said, suggests the central bank is prioritising stability over defending any specific level of the rupee—especially in a year marked by global currency volatility.

"The RBI does not want speculators to become comfortable with a one-way trade. At this stage, it is essential to curb excessive volatility," said Anindya Banerjee, head of commodity and currency at Kotak Securities.

Market participants believe the central bank is treading carefully: stepping in to smooth volatility, but letting market forces guide the broader direction of the rupee, given India's evolving external pressures.

What's Driving the Rupee's Weakness?

1. Trade deficit at historic highs
Imports have surged while exports remain under pressure, widening the deficit and increasing demand for dollars.

2. Portfolio outflows
Global funds are rebalancing portfolios amid U.S. rate uncertainty, geopolitical tensions, and tariff-related risks for India.

3. Weak FDI & ECB pipeline
Private capital flows have slowed dramatically, reducing the structural support for the rupee.

4. U.S. tariffs tightening screws
Higher duties on Indian goods—from steel to emerging electronics—have dampened export sentiment and increased current account stress.

What Happens Next?

Most currency strategists expect the rupee to remain under pressure, especially if U.S. yields stay elevated or trade tensions intensify. The RBI's intervention strategy—limited but timely—signals it is prepared to curb disorderly volatility, but not at the cost of exhausting reserves or distorting markets.

With the rupee weakening faster than its Asian peers, policymakers may be forced to reassess external vulnerabilities ahead of Budget 2026. The coming weeks will be crucial as liquidity conditions tighten globally and India's trade talks with the U.S. remain stalled.

For now, the 90-mark—long considered a psychological line has been decisively broken, marking a new chapter for the Indian currency in a year defined by geopolitical reordering, protectionism, and capital flight.