Rupee Falls 5% In 2025, Becomes Asia's Worst-Performing Currency

The Indian rupee concluded 2025 with its largest annual decline in three years, falling 4.95% against the US dollar to close at 89.88 per dollar. The currency has become Asia's worst-performing currency this year, facing persistent pressure from foreign portfolio investor outflows and heightened dollar demand from importers.

Final Trading Session and Year-End Performance

On the last trading session of 2025, the rupee depreciated 13 paise to close at 89.88 against the US dollar as month-end demand and foreign portfolio investors' dollar buying kept it under pressure. At the interbank foreign exchange, the local unit opened at 89.89 and touched an intraday low of 89.95 and a high of 89.84.

Year-End Performance:	Details
Annual Decline:	4.95%
Final Close:	89.88 per dollar
Daily Change:	-13 paise
Previous Close (2024):	85.64 per dollar
Record Low Hit:	91.08 per dollar

"Since the Trump Administration took over, the rupee has been the worst performing currency in the Asian Region, depreciating by more than 5% during 2025, marking its highest depreciation in the last three years," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

Foreign Investment Outflows Drive Weakness

The rupee's decline has been primarily driven by substantial foreign portfolio investor outflows, with $16.50 billion withdrawn from Indian equities throughout 2025. This represents a significant drain on investor sentiment and has contributed to the currency's persistent negative bias.

Capital Flow Impact:	2025 Data
FPI Equity Outflows:	$16.50 billion
Regional Ranking:	Worst in Asia
Recent FII Sales:	₹3,844.02 crore (Tuesday)
Market Performance:	Sensex +545.52 pts to 85,220.60

"Consistent outflows by FPIs and stake sales by investors, demand from defence, oil and gold have all impacted the rupee as it fell to its lowest at 91.08 before reined in to control it and bring it up to current levels," Bhansali noted.

RBI's Financial Stability Assessment

The Reserve Bank of India, in its Financial Stability Report released Wednesday, acknowledged the rupee's depreciation against the US dollar, attributing it to falling terms of trade due to tariff impacts and a slowdown in capital flows. Despite these challenges, the RBI maintained an optimistic outlook for the broader economy.

RBI Assessment:	Key Points
Economic Growth:	Strong growth expected
Domestic Demand:	Robust
Inflation:	Benign
Financial System:	Robust and resilient

"The domestic financial system remains robust and resilient, bolstered by strong balance sheets, easy financial conditions, and low financial market volatility. Nonetheless, there are near-term risks from external uncertainties - geopolitical and trade-related," the report stated.

Market Dynamics and External Factors

Forex traders identified multiple pressure points affecting the USD/INR pair, including a shift toward risk aversion driven by persistent capital withdrawals from foreign investors ahead of the holiday break. The dollar index was trading 0.10% higher at 98.33, while Brent crude futures rose 0.13% to $61.41 per barrel.

Market Indicators:	Current Levels
Dollar Index:	98.33 (+0.10%)
Brent Crude:	$61.41/barrel (+0.13%)
Nifty Close:	26,129.60 (+190.75 pts)
Market Sentiment:	Risk aversion amid FPI outflows

The rupee's performance reflects broader challenges facing emerging market currencies amid global economic uncertainties and shifting capital flows, with India's currency bearing the brunt of regional weakness in 2025.

The Indian rupee weakened against the US dollar in early trade on Thursday, falling 3 paise to 89.90 amid rising global crude oil prices and foreign institutional investor outflows. The currency faced additional pressure from a strengthening dollar and weaker sentiment in domestic equity markets.

Currency Performance and Market Dynamics

At the interbank foreign exchange market, the rupee opened at 89.96 against the dollar before strengthening to 89.90, representing a decline of 3 paise from its previous close. This marks a reversal from Wednesday's session when the currency had gained 31 paise to close at 89.87.

Parameter:	Current Session	Previous Session	Change
Opening Rate:	89.96	-	-
Current Rate:	89.90	89.87 (close)	-3 paise
Previous Day Move:	-3 paise	+31 paise	-

Foreign institutional investors continued their selling pattern, offloading equities worth ₹1,527.71 crore on Wednesday, according to exchange data. This sustained outflow has been contributing to the ongoing pressure on the rupee's performance.

RBI Intervention and Expert Analysis

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, highlighted the Reserve Bank of India's active market intervention. "The RBI capped the dollar strength against rupee at 90.30 and did not allow it go beyond this by selling at 90.22 levels on Wednesday, despite the constant dollar demand from FPIs and importers who kept buying dollars on all dips up to 89.75," Bhansali explained.

Looking ahead, Bhansali noted that "today the upside seems to be capped while the downside could extend to 89.50 if the RBI continues to intervene in the market."

Global Market Context

The broader currency and commodity landscape showed mixed pressures on the rupee:

Instrument:	Level	Change
Dollar Index:	98.69	+0.01%
Brent Crude:	$60.19/barrel	+0.38%

The dollar index, which measures the greenback's strength against six major currencies, traded marginally higher at 98.69, up 0.01%. Brent crude futures, the global oil benchmark, rose 0.38% to $60.19 per barrel, adding to the rupee's challenges as higher oil prices typically increase India's import bill.

Domestic Equity Market Performance

Domestic equity markets opened on a negative note, contributing to the overall pressure on the currency. The Sensex declined 255.86 points to 84,705.28 in early trade, while the Nifty slipped 65.90 points to 26,074.85.

Index:	Opening Level	Change
Sensex:	84,705.28	-255.86 points
Nifty:	26,074.85	-65.90 points

The combination of rising crude oil prices, continued FII outflows, and weak domestic market sentiment has created a challenging environment for the rupee, despite the RBI's intervention efforts to maintain stability around key levels.