In August, the Indian rupee lost almost 0.7 percent of its value, and it has lost 2.94 percent of its value versus the US dollar so far this year. Experts blame uncertainty around tariffs for August’s fourth month of decrease.
Money market analysts have expressed fears that the psychologically significant 90/USD threshold may be breached in the next months as the Indian rupee is expected to remain under pressure due to tariff-related headwinds.
RBI Intervention Amid Rupee Pressure
In order to guard against any major devaluation, the Reserve Bank of India (RBI) is probably going to intervene, experts told Moneycontrol.
It seems doubtful that the pressure on the native currency would lessen very soon, according to Bank of Baroda economist Aditi Gupta. “In the next days, the rupee is probably going to continue to be under pressure. The RBI will very likely step in to safeguard the currency, however. “A critical psychological threshold will be the 90/USD level.”
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Rupee Faces Persistent Decline
Since the beginning of 2025, the Indian rupee has decreased by 2.94% against the US dollar.
In August 2025 alone, the Indian rupee weakened by more than 0.7% versus the USA dollar.
For the last three years, this is the largest year-to-date decline.
Experts have mostly blamed the uncertainty around tariffs for the August devaluation, which marked the fourth straight month that the local currency has declined against the US dollar. The local currency dropped 2.15 percent in July, 0.20 percent in June, and 1.29 percent in May after rising 1.13 percent against the US dollar in April.
Tariffs Weigh on Rupee
Due to a number of variables, including month-end oil demand, Trump’s tariff pressure on India, and Rupee-Yuan dynamics, the Indian rupee suffered record low outflows from equities markets on August 29.
“The currency has withstood the regional trend to weaken on the back of portfolio withdrawals, mainly from the equity markets, and a wider tariff differential compared to peers,” said Radhika Rao, Executive Director as well as Senior Economist at DBS Bank.
Currency specialists believe that in order to maintain export competitiveness, the central bank may allow some devaluation.
Exports Benefit
The central bank might choose to let the rupee more freely reflect external influences rather than using reserves to maintain a certain level.
The claim may be that a weaker rupee increases the relative competitiveness of Indian goods abroad, hence reducing the impact of taxes on exports.
However, according to Amit Pabari, Managing Director of CR Forex Advisors, “there are significant external headwinds from tariffs and continuous foreign outflows, and totally fighting them off would be costly and ineffective.”
Weak FPI Inflows Persist
Alongside the Rupee’s decline has been a disappointing inflow of foreign portfolio investments (FPIs). Despite its strong macroeconomic climate and Q1 GDP growth rate, which exceeded projections, foreign investors have remained cautious about India.
Foreign inflows into India, particularly from FPIs, have been very low this year. FPI inflows, however, have not increased much.
Aditi Gupta of the Bank of India claims that this is as a result of the US imposing an expensive tax on Indian goods, which is producing a lot of market turmoil and influencing investor sentiment.
Tariffs, Rates Pressure Rupee
Tariff-related uncertainties have exacerbated the external environment and raised global financial market volatility. Economists note that foreign investors consider both the US interest rate trajectory and the high US tariff on India when allocating funds.
According to experts, the rupee’s movement in the next months would depend on how well foreign headwinds and domestic policy support are balanced.
Global variables, including the trajectory of US interest rates, portfolio flows, and tariff discussions, will be critical in determining whether the rupee breaks or remains below the 90-dollar threshold, notwithstanding the RBI’s expected stabilizing role.
The two main reasons harming the rupee are still the US tariffs, which put structural pressure on the trade balance, and the rise in gold prices, which further strain the current account. Amit Pabari said, “There are a few measures that can help avoid excessive depreciation.”