Rupee's Record Plunge: Asia's Worst Currency in 2025

With an estimated 5–6% year-to-date against the US dollar, the Indian rupee has turned out to be Asia's worst-performing currency in 2025; it has repeatedly hit historic lows, breached the 90 threshold, and topped out near 91 in mid-December. Steep US taxes of up to 50% on Indian exports have mostly driven this slide, which worsened trade imbalances and helped to a record merchandise trade deficit of $41.7 billion in October. Further cooling investor mood, echoing the effects of past worldwide crises but enhanced by protectionist measures, are persistent trade tensions and stalled US-India talks.

Capital outflows have increased the pressure; foreign portfolio investors (FPIs) have removed more than $18 billion from Indian stocks during the year in conjunction with subdued FDI inflow and repatriations. These elements generated continuous dollar demand, cancelling out weak foreign inflows even if India's GDP grew dramatically. To contain too much volatility, including a recent 25 basis point rate cut to 5.25%, the Reserve Bank of India (RBI) has intervened periodically, selling billions in forex reserves, but it has permitted more depreciation to maintain export competitiveness.

Looking ahead, a possible US-India trade agreement may help to stabilize the rupee at about 88–90, therefore providing comfort in the face of an international risk-off mood. Delays, however, risk more weakness toward 91 or beyond as traders search for short positions on the INR. Though domestic fundamentals are still solid, the path of the rupee in the next months depends on trade solutions and capital flow reversals.