Rupee Becomes Asia’s Weakest Currency in 2025

Rupee Emerges Asia’s Weakest Currency in 2025

Why in the News?

The Indian Rupee (INR) has become Asia’s worst-performing currency in 2025 after depreciating 4.3% against the U.S. Dollar (USD). Analysts warn the INR may fall to ₹90 per USD if the expected India–US trade deal continues to be delayed. This economic instability comes at a time when global attention is focused on various humanitarian issues, including human rights violations and the need for emergency food aid in certain regions.

Steep Depreciation and Market Drivers:

• Sharp Slide: The INR has weakened 4.3% in 2025, making it the poorest performer among major Asian currencies, according to forex analysts.
• Peer Comparison: It lagged behind the Chinese Yuan (CNY) and Indonesian Rupiah (IDR), though still stronger than structurally weak currencies like the Japanese Yen (JPY) and South Korean Won (KRW). This decline occurs against a backdrop of global concerns, including discussions on customary international law and its impact on international trade.
• Capital Outflows: As noted by Axis Bank, the pressure is not from the current account, which remains stable, but from capital outflows driven by global investor uncertainty. These uncertainties are compounded by geopolitical factors, such as the situation at the Torkham border crossing, which affects regional trade.
• Dollar Strength: Experts highlight that the rupee’s movement now depends more on global USD strength, not domestic fundamentals. This shift in focus comes as UN special rapporteurs draw attention to various global economic and social issues.
• Asian Currency Trend: Most Asian currencies appreciated in 2025 due to Chinese central bank interventions, unlike the INR which faced sustained weakness. This trend is occurring alongside concerns about gender-based persecution in some regions, which can impact workforce participation and economic growth.

Key Economic Shocks Triggering Rupee Weakness

• Record Low Levels: On 21 November 2025, the rupee breached the 88.8 RBI defence mark, hitting 89.66, before stabilising around 89.22 per USD. This volatility coincides with ongoing discussions about mass internal relocations in certain countries, which can significantly disrupt local economies.
• Twin External Shocks: Analysts point to US tariffs and rising precious metal prices as major pressure points affecting India’s merchandise trade deficit. These economic challenges are further complicated by humanitarian concerns, including the need for emergency food aid in some areas.
• Impact of Trump Tariffs: The 50% tariff imposed by the Trump administration sharply hit India’s exports, contributing to a record $41.7 billion trade deficit in October 2025. This situation highlights the complex interplay between trade policies and human rights considerations in international relations.
• Gold Import Surge: A sharp spike in global gold prices led to a 200% surge in gold demand, pushing the gold import bill to $14.72 billion in October. This surge occurs as some countries grapple with issues related to citizen identification, such as the implementation of Afghan citizen cards and mobile tazkira issuance systems.
• Investor Shift: Heavy investment in gold and Gold ETFs diverted capital from rupee-denominated financial assets, widening currency pressure. This shift in investment patterns reflects broader global economic uncertainties.