On September 24, 2025, the Indian rupee finished at 88.69 against the U.S. dollar, holding firm slightly above its historic low of 88.7975 established the day before. The resilience is ascribed to the Reserve Bank of India’s (RBI) tactical interventions in numerous currency markets, including the onshore spot, non-deliverable forwards (NDF), and currency futures markets.
Reuters
Drivers of the Volatility of the Rupee
Depreciation in the rupee has been driven by a number of external considerations:
U.S. Trade Policies: Steep tariffs imposed by the U.S. on Indian exports and raising fees for H-1B visas have generated concerns regarding the profitability of Indian IT companies and possible cuts in remittance inflows.
Global Dollar Strength: A stronger dollar in the U.S., fueled by economic uncertainty across the world, has added pressure on emerging market currencies such as the rupee.
Foreign Portfolio Outflows: Foreign investors have taken out around $1 billion from Indian equities during September, which has put pressure on the rupee to depreciate.
Strategic Interventions of RBI
The RBI, to address these problems, has taken some steps to stabilise the rupee:
Sales of Dollars: The RBI has sold a minimum of $5 billion in both onshore and offshore markets to dampen the rupee’s volatility.
Market Presence: The central bank has been constantly present in the foreign exchange markets, intervening in different segments to regulate fluctuations in exchange rates.
Liquidity Management: In response to banking liquidity shortages due to heightened tax outflows, the RBI has provided more money into the system to ensure overnight borrowing rates are in sync with the policy repo rate.
Economic Implications and Outlook
Despite RBI’s intervention, the rupee is still susceptible to external pressures:
Inflation Risk: A depreciating rupee raises import costs, and thus may contribute to inflation.
Depletion of Reserves: Ongoing intervention could drain foreign exchange reserves, constraining the RBI from countering future shocks.
Kotak Securities
Investor Sentiment: Prolonged rupee volatility might influence investor sentiment and foreign investment inflows.
Experts have suggested that the rupee could stabilize between 88 and 88.50 against the dollar in the near future, subject to ongoing RBI interventions and stabilization in external factors.
Financial Express
Conclusion
The RBI’s proactive interventions have given a temporary respite to the rupee against tough international economic conditions. Sustained interventions, though, may come at the cost of India’s foreign exchange reserves and have implications for the broader economy. The rupee’s path for the next few months will be determined by monitoring global trade policy developments, investor sentiment, and domestic economic indicators on a continuous basis.
