USD/INR Dynamics on 2 December 2025

The US dollar continued to assert its dominance over the Indian rupee on Tuesday, pushing the pair to a new all‑time high and edging the currency closer to the psychologically critical 90‑per‑dollar threshold. At market close, the rupee was quoted at 89.95, a 42‑paise climb from the previous session and a record low for the year.

Technical Landscape

  • All‑time high: The USD/INR pair reached 89.7971 earlier in the week, setting a new 52‑week peak.
  • Support zones: Analysts noted that a consolidation around the 89–89.60 corridor was expected before a further decline. The recent breach of this level confirms a lack of immediate support.
  • Resistance: The 90‑per‑dollar mark remains a key psychological barrier. Any breach would trigger a reassessment of the pair’s risk‑reversal potential.

Market Drivers

  1. RBI’s Neutral Stance The Reserve Bank of India has maintained a dovish stance, refraining from intervention. This hands‑off approach has allowed the rupee to trade freely against a rallying dollar, especially in the absence of a U.S.–India trade agreement that could have bolstered investor confidence.

  2. Foreign Institutional Investor (FII) Activity FIIs have been net sellers in the Indian equity market, reducing their exposure to Indian assets and reallocating capital to the dollar. The resulting outflow has exerted downward pressure on the rupee.

  3. Global Dollar Demand The U.S. manufacturing ISM index remained weak, reinforcing expectations of continued accommodative monetary policy. This scenario has attracted importers and foreign portfolio investors seeking higher returns in dollar‑denominated assets.

  4. Domestic Outflows Persistent outflows—driven by trade uncertainty and a lack of clear policy signals—have amplified the rupee’s depreciation streak. The currency has fallen more than 4 % year‑to‑date, with November alone registering a 0.8 % decline.

Forward Outlook

  • Near‑term: The pair is poised to test the 90‑per‑dollar barrier imminently. A breach would likely accelerate the rupee’s decline, potentially pushing it into the 90–90.50 range before a short‑term correction could materialise.
  • Medium‑term: Should the RBI signal any tightening or if U.S. monetary policy pivots away from accommodation, a reversal could be catalysed. Conversely, sustained dollar strength and continued FII outflows could push the rupee below 90.30.
  • Strategic Implications: Hedging strategies will need to account for the heightened volatility. Traders may seek to lock in forward rates before a potential 90‑barrier breach or adopt a protective stance against further depreciation.

In sum, the USD/INR pair’s current trajectory reflects a confluence of external dollar demand, internal policy neutrality, and sustained capital outflows. The impending 90‑per‑dollar milestone will serve as a critical touchstone for market participants assessing the rupee’s near‑future path.