The Indian Rupee (INR) continues to face significant headwinds, recently reaching historic lows, with the exchange rate at 90.42 per U.S. dollar. This marks a 5% depreciation over the past year, primarily driven by a widening trade deficit and substantial foreign investment outflows. Analysts have noted that the U.S. tariffs on Indian exports, currently at 50%, have intensified pressure on the rupee by increasing demand for foreign currency.
In 2025, foreign investors have withdrawn nearly $17 billion from Indian equities, contributing further to the rupee's decline. In response to these challenges, the Reserve Bank of India (RBI) has shifted its stance, indicating a tolerance for a weaker rupee. The bank's focus is now on curbing excessive volatility rather than maintaining a specific exchange rate.
Market forecasts suggest that without a quick resolution to the ongoing trade discussions with the U.S., the rupee may fall to 92 against the dollar. Current exchange rates reflect the pressure, with the INR/USD pair trading at 0.011080, which is 1.6% below its 3-month average. Similar trends are evident in other currency pairs, with the INR also at 90-day lows against the Euro (0.009436), the pound (0.008272), and a relatively stable performance against the yen, trading near 1.7226.
Overall, the INR's recent performance highlights an environment of heightened volatility and uncertainty, with fundamental pressures from trade dynamics and capital flows driving currency values. Businesses and individuals engaged in international transactions may need to navigate these challenges carefully, considering potential implications on costs and exchange rates in the near term.
