Pressure on rupee to continue, us trade deal can cushion fall
The Indian rupee has hit a historic low, plunging to 91 against the US dollar in just 13 days after breaching the key 90 mark. This steep decline marks one of the sharpest drops in recent years, with the currency falling from 85 to 90 in under a year. Analysts now warn of further pressure as economic challenges mount.
The rupee’s slide has made it Asia’s worst-performing currency in 2025. A major factor is the massive outflow of foreign portfolio investments (FPI), totalling over $17.8 billion this year alone. Weak global demand has also tightened dollar supply, worsening the currency’s decline.
The Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, has intervened aggressively to curb volatility. Over the past eight months, the central bank has spent roughly $30 billion propping up the rupee—a smaller sum than the $68 billion deployed between 2022 and 2024. However, the RBI’s approach remains focused on smoothing fluctuations rather than defending a fixed exchange rate. While cheap Russian oil imports have eased some pressure on India’s current account, rising costs for gold, silver, electronics, and other imports continue to strain trade balances. Though a weaker rupee typically boosts exports, the benefit is offset by higher import bills, leaving the overall trade position unchanged. The currency’s troubles are compounded by delays in the India-US trade deal, shrinking foreign direct investment (FDI), and persistent FPI withdrawals. Without relief on these fronts, the rupee is on track for its worst annual performance since 2022.
The rupee’s rapid depreciation reflects a mix of external pressures and domestic economic strains. With the RBI’s foreign exchange reserves under pressure and key trade negotiations stalled, the currency is likely to face continued volatility. Analysts expect the downward trend to persist unless global demand recovers or capital flows stabilise.
