Rupee Crashes to All-Time Low: Can A Long-Awaited India-US Trade Deal Finally Turn The Tide?

December 13, 2025

USD vs INR: The Indian rupee remains stuck near all-time lows against the US dollar even though the dollar index has dropped to its weakest level in two months, as traders stay wary amid the absence of an India–US trade deal and sustained foreign portfolio outflows. The rupee hit a record intraday low of 90.56 per dollar on Friday, December 12, down 24 paise from the previous close, before ending the session at 90.49, a fall of 17 paise.

Foreign portfolio investors (FPIs) have continued to sell Indian assets aggressively, with outflows of ₹17,955 crore so far in December and a total of ₹161,630 crore for the year, according to NSDL data. On the trade front, India and the US wrapped up two days of talks on Thursday, during which both sides discussed a range of trade issues, including ongoing negotiations for a “mutually beneficial” bilateral agreement, as per a PTI report. In a phone call the same day, Prime Minister Narendra Modi and US President Donald Trump reviewed ways to maintain momentum in the economic partnership, amid signs the two sides are edging closer to sealing the long-awaited trade deal.

Will an India–US Trade Deal Lift the Rupee?

Harshal Dasani, Business Head at INVAsset PMS, said the rupee’s latest lows reflect India-specific uncertainty rather than broad dollar strength, noting that the dollar index has eased since the US Federal Reserve cut rates and softer US data pulled global dollar momentum lower. Reuters data show the US currency down about 1.1 per cent so far in December and more than 9 per cent for the year, putting it on track for its sharpest annual decline since 2017.

Dasani said markets had already priced in progress on tariff cuts and improved market access, and the lack of a clear announcement has created a temporary overhang on sentiment. This divergence of a weaker global dollar but a softer rupee underscores how uncertainty over the trade deal is weighing disproportionately on the USDINR pair, he added. He and other analysts expect a meaningful correction in USDINR once there is clarity on tariff lines, supply-chain realignment and export competitiveness.

Analysts at BofA said the rupee remains heavily tied to portfolio flows, which are partly influenced by tariffs. They argued that finalising a trade deal that trims tariff barriers would be crucial for reducing uncertainty for equity investors, while a stronger growth rebound next year could support corporate earnings and ease valuation concerns. However, they also warned that months of negotiations without a decisive outcome raise the risk of the agreement either failing to materialise or falling short of expectations.

In such a weak-deal scenario, Riya Singh, Research Analyst – Commodities and Currency at Emkay Global Financial Services, said a disappointing outcome would reinforce fears of prolonged tariff exposure and could prolong the current phase of foreign investor exits, especially given equity outflows of over ₹18,000 crore in December alone. If that happens, she said, USDINR is likely to stay tilted higher as risk sentiment remains subdued.

Rupee levels to watch

Against this backdrop, Singh expects the near-term bias in the rupee to remain toward further weakness. She noted that the Reserve Bank of India has so far intervened mainly to smooth volatility rather than defend any particular level. If global risk appetite improves and trade talks deliver a positive surprise, she believes the rupee could recover towards 89.80–89.60. In the absence of a clear catalyst, however, she cautioned that the currency pair could retest the recent high near 90.80, with room to move toward 91.50–92.00 in the coming weeks.

BofA, which holds a relatively optimistic view, said expected US dollar weakness next year should still support a modest rupee appreciation, potentially accelerating around the rupee’s seasonally favourable first quarter. The brokerage forecasts the rupee at 86 per US dollar by end-2026, broadly in line with a weaker global dollar profile. The article concludes with a disclaimer that the views are those of individual analysts and broking firms, not Mumbai Samachar, and urges investors to consult certified professionals as market conditions can shift quickly.