Rupee Slides to Record Low of 91.01 Amid Tariffs, FII Outflows and Trade Deal Uncertainty

Written by Tanisha Cardozo || Team Allycaral

The Indian rupee weakened to a fresh all-time low of 91.01 against the US dollar on Tuesday, marking its fourth consecutive session of decline and extending an unprecedented slide in 2025. The currency fell as much as 36 paise intraday to 91.14 before recovering slightly, ending the session 23 paise lower despite a weaker dollar and falling global crude oil prices.

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Forex traders attributed the sustained weakness to a combination of factors including the absence of intervention by the Reserve Bank of India, delays in finalising an India-US trade deal, and continued foreign institutional investor outflows. The rupee has dropped from 90 to 91 against the dollar in just the last 10 trading sessions and has slipped nearly 1% over the past five sessions alone, with traders warning that the 92-per-dollar mark could be tested later this month.

The dollar index was marginally lower at 98.23, while Brent crude declined nearly 2% to around $59.48 per barrel. However, these supportive global cues failed to arrest the rupee’s fall. Domestic equity markets also reflected the pressure, with the Sensex closing over 500 points lower and the Nifty 50 shedding more than 160 points.

Market experts noted that India’s currency has become the worst-performing in Asia this year, declining nearly 6% against the dollar and over 8.5% from its year-to-date peak. Analysts pointed to steep US tariffs on Indian exports and the lack of a bilateral trade agreement as key structural headwinds. Persistent selling by foreign investors has added to the pressure, creating a cycle of capital outflows and currency weakness.

Despite the sharp depreciation, economists believe the falling rupee is not significantly harming the broader economy. Low inflation, a narrowing trade deficit and strong GDP growth have allowed the RBI to maintain a hands-off approach. India’s trade deficit narrowed to a five-month low in November, while inflation remains well below the central bank’s target and economic growth continues to show resilience.

The rupee’s slide, however, has begun to weigh on stock market sentiment, with global funds pulling billions of dollars from Indian equities and debt in recent months. While exporters, particularly IT companies, have benefited from the weaker currency, analysts caution that overall equity returns may remain muted amid global uncertainty and capital flow challenges.

Market participants remain cautious, noting that a meaningful recovery in the rupee is unlikely unless there is a breakthrough in India-US trade negotiations. Until then, the path of least resistance for the currency is expected to remain on the weaker side.