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The rupee has declined more than 1.5% over 2025 so far, and experts says the depreciation of the rupee is due to the strengthening of US dollar. Here’s why is it falling and what experts say.
The rupee hit another record low as as market participants mulled the impact of tariffs being imposed by the United States and China.
Falling for the past few weeks, the Indian rupee hit its fresh record low of 87.4975 against the US dollar during the afternoon trade on Wednesday. The local currency opened 5 paise lower at 87.1263 against the US dollar in the morning, as compared to 87.0762 at the previous close.
Forex traders said the rupee is trading with a negative bias over global trade war as market participants mulled the impact of tariffs being imposed by the United States and China.
However, any central bank intervention may support the rupee, they added.
The rupee has declined more than 1.5% over 2025 so far.
How Does It Impact You?
A weaker rupee has several implications for consumers:
Increased Import Costs: India relies heavily on imports for goods like crude oil, electronics, and machinery. A depreciated rupee makes these imports more expensive, potentially leading to higher prices for products and services.
Rising Inflation: As import costs rise, businesses may pass these expenses onto consumers, resulting in increased prices for everyday items. This can erode purchasing power and affect household budgets.
Travel and Education Expenses: For those planning to study abroad or travel internationally, a weaker rupee means higher costs for tuition, accommodation, and travel, making foreign experiences more expensive.
Exports Likely To Increase, Too: Apart from impacting negatively, the fall in rupee is positive for export-oriented sectors. India’s IT and pharma sector earns significant portion of their income from exports. A weaker rupee makes their products competitive in the global market, thus pushing their demand.
Why Is It Falling?
NITI Aayog member Arvind Virmani has said the recent depreciation of the rupee is due to the strengthening of US dollar and opined that in this period of global uncertainty, India should also look at the rupee-yuan rate.
In an interview with PTI, Virmani said the RBI’s stated policy is that it does not target a specific exchange rate but intervenes in the market to check ‘excess’ volatility.
“When we talk about the rupee-dollar rate, there are two elements to it–one is the appreciation of the US dollar… and much of what you see… is now due to the US (dollar) appreciation. So that is really not under our control, and not something our policymakers have to worry about,” he said.
The other element, Virmani said, is the depreciation with respect to the index, and one way to measure that is to compare it to other countries because the general appreciation of the rupee affects everybody.
“As somebody suggested recently, we should look more closely at the rupee-yuan rate, that’s a good suggestion. Of course, we have to look broadly at our competitors, also in this period of uncertainty,” the NITI Aayog member noted.
The reasons for the rupee hitting record lows almost on a daily basis against the US dollar range from a widening trade deficit to a surge in the dollar index after the US Federal Reserve hinted at fewer rate cuts in 2025.
What Steps Is RBI Taking?
The Reserve Bank of India (RBI) likely intervened to support the rupee on Wednesday as the currency hovered near its all-time low amid broad-based interbank dollar demand, according to a Reuters report citing three traders.
State-run banks were spotted offering dollars near 87.24-87.26 levels, most likely on behalf of the RBI, which helped limit the rupee’s losses, traders said.
Expectations that the central bank will cut interest rates at its policy meeting on Friday have weighed on the rupee, alongside routine dollar demand from importers.
The dollar index was lower by 0.2% at 107.8 while Asian currencies were mostly stronger.