Rupee Hits Fresh Record Low As FII Outflows And Dollar Demand Intensify
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- Last Updated: 18 Dec 2025 at 10:26 PM IST
Rupee Hits Fresh Record Low As FII Outflows And Dollar Demand Intensify
The Indian rupee plunged to a new all-time low against the US dollar, continuing its losing force since foreign institutional investors (FMI) outflows have persisted and demand for dollars has been high. The local currency began trading below and settled at ₹90.74 against the US dollar, its lowest point in history, as the world remained cautious and the local markets continued to sell off.
According to traders, the fall was due to a combination of overseas funds' exit, dollar demand by importers, and poor global signals. As the currency is under pressure, what is fueling the plummeting rupee, and what is the importance of the move on markets?
What Is Driving The Rupee’s Latest Fall?
The foreign investors have already withdrawn over ₹17,955 crore worth of Indian equities in December 2025, which is an indication of a wider trend of deeming out of the emerging markets since the world has been uncertain, and the interest rates in developed economies have been rising. This is a constant leakage and has caused the supply of dollars to decrease in the domestic market, exerting pressure on the rupee.
Other factors that have contributed to the depreciation of the emerging markets' currencies are higher US bond yields. Consequently, the rupee has strengthened marginally, supposedly with the intervention of the Reserve Bank of India.
Besides capital outflows, delays in trade deals with the US have led to the record low of the rupee. Dollar buyers have been active especially oil marketing companies and other sectors that depend on imports such as these in the world as the global crude oil prices are volatile.
How Are Markets And Policymakers Responding?
The financial markets in the domestic markets have been affected by the weakness of the rupee. The equity benchmarks also opened at a low level relative to the currency in a sign of caution by the investors due to the ongoing selling of the foreign currency as well as fears of currency stability. The areas that depend on imported goods, including power and electronics, were under further strain as the cost increased in association to the weaker rupee.
Conversely, there could be some gain to export-oriented industries like information technology and pharmaceuticals through a weaker rupee, since a weaker rupee can enhance the realisation of overseas revenues. Analysts, however, warn that the general market mood is still weak because of global headwinds.
The foreign exchange reserves of India have risen from $1.03 billion during the last few weeks leading to $687.26 billion in December 12, which means that the RBI has enough buffers to deal with the fluctuating values of the currency. The question is: can volatility be curbed and the direction set in which the rupee goes unless there are world forces that force the rupee?
What Should Investors Watch For Next?
In the future, market players are forecasting the direction of the rupee to follow the global events and the trend in capital flows. It will be important to keep on monitoring FII activity since sustained foreign selling may continue putting pressure on the currency in the near future.
There are also global forces like trends in the US bond yields, the cues by the US federal reserve, and geopolitical issues that are likely to play a determining role. Any softening in global risk aversion or indications of any stabilisation in the US monetary policy would be temporary relief to the rupee.
As the rupee continues to make historic lows and volatility continues, the major question is whether the world conditions and capital flows would calm down to allow the currency to recover or whether the continued external pressures would continue to challenge the currency's strength in the coming months.
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