INTRODUCTION
The Indian rupee plunged to a fresh all-time low of 90.41 per US dollar in December 2025, marking one of its steepest annual declines of nearly 4% year-to-date. Global uncertainties, stronger US dollar, and persistent capital outflows have been eroding INR’s stability since Q1 2025.
In this detailed analysis, we break down the top three reasons behind the fall, what it means for India’s economy, how it affects consumers and businesses, and what the outlook for 2026 could look like.
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Why did the rupee fall to 90.41 per dollar in 2025?
The rupee fell due to (1) aggressive foreign investor outflows, (2) a stronger US dollar driven by high US interest rates, and (3) rising import bills—especially crude oil—pressuring India’s trade deficit. Together, these created sustained downward pressure, pushing the INR to its weakest level ever.
FULL BLOG CONTENT
Rupee Hits a New Low at 90.41 Per Dollar: 3 Reasons Why Rupee Plunged 4% in 2025
H2: Short Summary — Why Rupee Fell in 2025
Here are the three biggest contributors:
Large FII outflows exceeding $18–20 billion in 2025
Stronger US dollar as Fed held rates higher for longer
Rising crude oil prices and widening trade deficit
H2: Reason 1 — Heavy FII Outflows Amid Global Risk-Off Sentiment
Foreign investors pulled out billions from Indian equities and debt as global markets turned volatile.
H3: Why did FIIs sell Indian assets?
Heightened global recession fears
Higher yields in the US made emerging markets less attractive
Geopolitical tensions in Asia & Europe
Concerns over India’s elevated valuations
H4: Impact on rupee
Massive dollar demand
Weakening forex market liquidity
Continuous pressure on INR
Expert Commentary
“As soon as the US 10-year yield approached the 4.5–4.7% range, emerging markets including India experienced persistent outflows. The INR’s decline was a direct reflection of this shift,” says a senior FX strategist at a top global bank.
H2: Reason 2 — Stronger US Dollar & Higher US Interest Rates
The dollar index (DXY) remained above 106–107, making the greenback the strongest global currency in 2025.
H3: Why the dollar strengthened
US Fed delayed rate cuts
Stronger-than-expected US GDP
Safe-haven demand increased
H4: How this impacted INR
A stronger dollar naturally weakens all emerging market currencies, and INR was no exception. India imports more than it exports, making it vulnerable to dollar strength.
H2: Reason 3 — Rising Crude Oil Prices Pushed India’s Import Bill
India imports 85%+ of its crude, so any spike directly increases foreign exchange needs.
H3: Crude price trend in 2025
Brent crude stayed between $84–$92 per barrel
Geopolitical tensions in the Middle East raised supply fears
H4: Impact on trade deficit
Higher oil prices → Larger import bill → More dollar demand → Rupee depreciation.
H2: Impact of Rupee Falling to 90.41 on Common People
Table: Winners vs Losers
| Group | Impact |
|---|---|
| Exporters | Benefit from higher dollar earnings |
| Importers | Face higher raw material costs |
| Students abroad | Higher tuition & living cost |
| Overseas travellers | Flights, hotels more expensive |
| NRIs | Remittances become more valuable |
H2: Comparison Table — Rupee Performance vs Asian Peers (2025)
| Currency | YTD Performance | Status |
|---|---|---|
| INR | -4% | Weakest in South Asia |
| CNY | -1.2% | Mildly weak |
| JPY | -2.8% | Volatile |
| KRW | -3.1% | Weak |
| THB | -2.4% | Weak |
H2: Will the Rupee Fall Further in 2026?
H3: Key factors to watch
Fed’s rate-cut cycle
Oil price stability
India’s export growth
FII inflows returning
RBI’s forex reserve management
Expert Insight
If crude stays above $90 and FIIs continue selling, INR could test 91–92 levels. However, if Fed cuts rates in mid-2026, rupee may recover to 88–89.
H2: Pros & Cons of a Weak Rupee
Pros
Boosts IT exports
Supports manufacturing exports
Increases NRI remittance flows
Cons
Higher inflation
Costlier imports
Wider trade deficit
Pressure on RBI reserves
H2: Key Takeaways
Rupee hit 90.41 per dollar, its weakest level ever
2025 saw 4% depreciation—steeper than most Asian currencies
Main reasons: FII outflows, strong USD, rising crude prices
Consumers face inflation, costlier imports, expensive foreign travel
2026 trajectory depends on Fed policy & crude price stability
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H2: Frequently Asked Questions
1. Why did the rupee fall to 90.41 per dollar?
Due to FII outflows, stronger US dollar, and rising crude prices.
2. Is the rupee expected to weaken further?
If crude stays elevated, INR may touch 91–92 in early 2026.
3. How does a weak rupee affect students studying abroad?
Their tuition, rent, and living expenses rise due to higher forex conversion.
4. Does the rupee fall increase inflation?
Yes, imported goods like electronics, fuel, and machinery become costlier.
5. How does RBI stabilise the rupee?
By selling dollars from forex reserves and adjusting liquidity.
6. What happens to petrol prices when rupee falls?
Petrol and diesel become costlier as India imports crude.
7. How does falling rupee affect exporters?
Exporters earn more for the same dollar revenue.
8. Is falling rupee bad for the economy?
Short-term yes because it raises inflation, but exports may benefit.
9. Why is the US dollar strong in 2025?
High US interest rates and robust economic data support the dollar.
10. How do FIIs impact the rupee?
Large FII selling increases dollar demand, weakening INR.
11. What is India’s trade deficit situation?
High oil imports widened the deficit in 2025, pressuring INR.
12. Will RBI hike rates to support the rupee?
Unlikely, unless inflation spikes significantly.
13. Is rupee undervalued now?
It is relatively weak, but fundamentally stable due to strong reserves.
14. What sectors gain from a weak rupee?
IT, pharma, textiles, and chemicals.
15. Should investors worry?
Short-term volatility will continue, but long-term fundamentals remain strong.
CONCLUSION
The rupee’s fall to 90.41 per dollar in 2025 reflects global shifts, domestic vulnerabilities, and market sentiment. While this puts pressure on inflation and imports, India’s strong economic fundamentals and robust forex reserves offer long-term resilience.
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Published on : 4th December
Published by : Selvi
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