Reserve Bank of India Intervenes as Rupee Hits Record Lows

The Indian rupee hit a series of record lows in December 2025, breaching the 91-per-dollar mark on December 16 and reaching an intraday peak of 91.56. The depreciation was driven by persistent foreign portfolio investor outflows—exceeding $18 billion in local stocks this year—and a trade stalemate with the United States, where the Trump administration imposed 50% tariffs on Indian goods. Additional pressure came from a 50% trade tariff imposed by Mexico on Indian exports.

To combat this volatility, the Reserve Bank of India executed aggressive interventions. This included a $5 billion buy-sell swap auction and the sale of an estimated $2-3 billion through nationalized banks in spot and non-deliverable forward markets. These actions, combined with falling Brent crude oil prices near $59 per barrel, helped the currency rebound to close at 89.27 on December 19, marking its strongest single-day gain in over three years.

Government officials dismissed concerns over the currency's 6.5% year-to-date decline. Sanjeev Sanyal, a member of the Prime Minister's Economic Advisory Council, argued that exchange rate weakness is common for high-growth economies and has not generated domestic inflation. Governor Sanjay Malhotra stated that the trend aligns with historical patterns and noted that India's $690 billion in forex reserves are sufficient to meet external liabilities. While a framework deal with the U.S. is being pursued, analysts suggest the rupee may remain volatile until a final agreement is reached, potentially by March 2026.