Rupee sees short‑term stability, after sharp slide over past year and more: what it means

The Indian rupee has faced significant pressure in 2025 but is expected to remain broadly stable in the next two to three months according to a recent assessment by Union Bank of India. Over the past year, the rupee has weakened by roughly ₹6 per US dollar, falling from around ₹83.7 per US dollar in 2024 to approximately ₹89.5 per US dollar in late November 2025. The currency even hit a record low of ₹89.49 per US dollar, reflecting pressure from both domestic and global factors.

Looking at a longer-term perspective, the rupee has depreciated substantially over the past five years. In January 2020, the currency was roughly ₹74.5 per US dollar, meaning it has dropped about ₹15 per dollar over this period, or around 20-25 per cent, underscoring the persistent long-term pressure on the currency.

The Union Bank of India report notes that despite this depreciation, the rupee has been trading in a tight range, under pressure from foreign institutional investor (FII) outflows exceeding USD 14 billion, a strong US dollar, and delays in the first tranche of the India-United States Bilateral Trade Agreement (BTA). Easing inflation and recent reforms under the Goods and Services Tax (GST) have provided some support, helping the rupee avoid a sharper fall.

The bank projects the rupee to trade between ₹88.80 and ₹89.50 per US dollar through December. If domestic equity inflows recover or trade-deal negotiations progress, the currency could strengthen toward ₹88.50, with ₹88.80 acting as an interim support level. Conversely, resistance near ₹89.50 may cap gains, while a break above could push it toward ₹89.90.

Several factors could influence the rupee’s movement in the coming months. Renewed FII outflows, geopolitical tensions, a strong US dollar, global interest-rate shifts, or slower domestic economic growth could exert additional pressure on the currency. On the other hand, progress in the India-US Bilateral Trade Agreement, a possible Reserve Bank of India (RBI) rate cut, and potential US Federal Reserve (US Fed) rate cuts could help stabilize or even strengthen the rupee. While some economies deliberately weaken their currencies to boost export competitiveness, the report notes that India is not actively pursuing intentional depreciation; instead, the rupee’s fluctuations are largely driven by market forces, external conditions, and central-bank efforts to maintain stability.

Short note on trend compared to previous years:

• Over the last 12 months, the rupee has depreciated roughly ₹6 per dollar.

• Over the last five years, it has lost about ₹15 per dollar, showing a clear long-term weakening trend.

Currently, with the rupee trading around ₹89.45-₹89.50, market participants remain cautious, keeping a close eye on capital flows, global developments, and policy cues, which will continue to shape the currency’s movement in the near term.