INR ends 2025 with biggest annual decline in 3 years
What's the story
The Indian rupee has witnessed its second consecutive monthly decline in December, closing at ₹89.87 against the US dollar today. The currency depreciated by 0.1% on the day and lost 0.5% for the month, marking a significant annual depreciation of 4.7% in 2025, the worst performance in three years. The rupee even breached the ₹91-per-dollar mark for the first time this month before recovering due to the Reserve Bank of India's (RBI) intervention efforts.
Market influences
Factors influencing rupee's performance in 2025
The rupee's performance was influenced by foreign selling of Indian equities, increased importer hedging, and lack of a trade deal with the US. Anil Bhansali, head of treasury at Finrex Treasury Advisors, said, "Consistent outflows by foreign investors... and dollar demand from defense, oil and gold are all impacting the rupee." These factors contributed to the currency's decline throughout much of 2025.
Central bank action
RBI's intervention and its impact on INR
The RBI intervened aggressively on two occasions after the rupee breached the ₹91-per-dollar mark. The central bank's dollar sales helped curb the rupee's decline and indicated its discomfort with one-sided moves. This intervention was similar to actions taken by the RBI in October and November, when it stepped in aggressively to disrupt persistent pressure on the currency.