Indian Rupee Faces Pressure Amid Trade Uncertainty

As of November 28, 2025, the Indian rupee has experienced a decline, trading at approximately INR89.46 against the U.S. dollar, just above its all-time low of INR89.49 reached on November 21, 2025. This depreciation has been attributed to ongoing uncertainties surrounding U.S.-India trade negotiations, which have not progressed as anticipated. Market analysts had expected a breakthrough by a fall 2025 deadline, but the lack of updates has intensified pressure on the currency. Additionally, unwinding of long positions on the rupee by offshore market participants has contributed to its decline. However, state-run banks, likely acting on behalf of the Reserve Bank of India (RBI), have intervened by selling dollars, which has somewhat mitigated the rupee's fall.

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The rupee's current depreciation of about 7% since late November 2024 mirrors past trends, notably during 2018 when it fell 11%-12% against the dollar amid similar global pressures. Factors influencing the rupee's value include rising U.S. interest rates and trade tensions, particularly during the first term of U.S. President Donald Trump. The RBI has employed various measures, including currency swaps, to stabilize the rupee in the past, such as a $10 billion dollar/rupee buy-sell swap auction in February 2025. Despite these interventions, the rupee continues to face challenges, including a widening current-account deficit driven by increased imports and high U.S. trade tariffs.

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The RBI's ability to stabilize the rupee is limited under the current floating-but-managed exchange rate regime, which allows for smoothing volatility rather than fixing rates. Since November 2024, the RBI has sold approximately $50 billion in foreign exchange to support the rupee. Nonetheless, the rupee's decline highlights persistent external pressures. On a more positive note, India's foreign exchange reserves remain robust at around $693 billion, and retail inflation has significantly decreased, recorded at just 0.25% in October 2025. This low inflation rate provides the RBI with some leeway to tolerate modest currency depreciation without necessitating aggressive interest rate hikes.

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Critics argue that India's heavy dependence on oil imports exacerbates its vulnerability to currency fluctuations. The transition from cheaper Russian crude to more expensive U.S. oil could further strain the rupee, especially as crude oil constitutes over 20% of total imports. To address these vulnerabilities, experts suggest that the Indian government should prioritize strategic initiatives such as accelerating transport electrification and developing a coherent trade policy, rather than relying solely on bilateral trade agreements that may not yield the desired diversification of trade routes.

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• “In the near term, USD/INR is likely to stay within a broad 88.90–89.80 band, with 88.80–89.00 serving as a firm support zone,” — Amit Pabari, Managing Director at CR Fores

Reuters

• “In such a hostile global macro-environment, the RBI’s mandate is limited: under the floating-but-managed regime, it can only ‘smoothen volatility’ rather than fix the exchange rate.” — Economic Analyst

The Hindu

• “Steps such as faster transport electrification must be treated as strategic imperatives and pursued with urgency.” — Economic Policy Expert

The Hindu

The Indian rupee's trajectory remains uncertain as it navigates complex global economic conditions and domestic policy challenges.

The Hindu