Indian currency again falls past the 90 mark against the dollar | Photo credit: ALLEN EGENUSE J
The Indian unit closed weaker on Monday, crossing 90 against the dollar again. The price closed at 90.07 per USD, compared to the previous close of 89.98. Last Wednesday, the rupee hit a record intraday low of 90.43.
Market players say the USD/INR swap, to be executed by RBI on December 16, will drain $5 billion of dollar liquidity from the banking system, leaving banks with an equivalent amount of rupee liquidity.
Dilip Parmar, Senior Research Analyst at HDFC Securities, said the rupee depreciated for the second consecutive day, mainly due to the Reserve Bank of India’s decision to cut the benchmark interest rate (from 5.50 percent to 5.25 percent) and introduce accompanying liquidity measures, both of which put downward pressure on the currency.
“This policy easing, coupled with prevailing risk-averse market sentiment and continued foreign fund outflows, has further contributed to the rupee’s weakness.
“From a technical perspective, the spot USDINR is expected to encounter near-term resistance at the 90.40 level, with critical support at 89.70,” he said.
BofA Global Research noted in a report that the rupee has devalued against the USD by 4.7 percent YTD (tear-to-date) in 2025, and by more than 5.8 percent in the past year.
“In terms of REER (Real Effective Exchange Rate), the weakness has been even greater, with YTD weakness through November at an estimated 8.6%, and one-year weakness of 12.1%.
“This is a large amount of weakness, both from the current episode and from a historical context, as the rupee had weakened by about 8.7 percent in 2018, 14 percent in 2013 and 18.7 percent in 2008, the previous periods of large-scale depreciation of the rupee,” the report said.
RBI Governor Sanjay Malhotra last Friday emphasized that the central bank’s policy has always been to let the market determine the value of the rupee and not to focus on a price level or range.
“We believe that the markets are very efficient in the long term. It is a very deep market. We have seen this earlier in February, the rupee against the dollar had risen to almost 88 and within a period of three months it had fallen back below 84,” the governor said at a press meet after the monetary policy.
The Governor emphasized that fluctuations in USD/INR volatility do occur and can occur.
“Our efforts have always been to reduce any abnormal or excessive volatility and that is what we will continue to do. Our external sector, as I also mentioned in my statement, is very strong…,” Malhotra said.
India’s current account deficit fell from 2.2 percent of GDP in the second quarter of 2024-2025 to 1.3 percent in the second quarter of 2025-2026, thanks to robust services exports and strong remittances.
Export services
Malhotra noted that healthy services exports, coupled with strong remittances, are expected to keep CAD modest through 2025-2026. As of November 28, 2025, India’s foreign exchange reserves stood at $686.2 billion, providing robust import coverage for over eleven months.
“Overall, India’s external sector remains resilient. We are confident that we can comfortably meet our external financing needs,” he said.
The Governor underlined that India has sufficient reserves; the current account is very manageable at around 1 percent.
“And given the strong fundamentals of our country, we should get good capital flows… So, I think, we are in a very comfortable situation as far as the position of the external sector is concerned,” he said.
Published on December 8, 2025
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