Since 2026, the Indian Rupee has depreciated by approximately 7.5% against the US Dollar
The Rupee is currently hovering around 96.5, hitting a new low for the year, primarily driven by foreign capital outflows, high oil prices, and a strong dollar, making it one of the worst-performing currencies in Asia since 2026.
The Reserve Bank of India is responding through measures such as intervening in the foreign exchange market, with the market paying attention to its impact on import inflation and capital flows.
Source: Public Information
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The Indian Rupee depreciated by about 4.7%-5.5% in 2025, continuing the depreciation trend into 2026, having previously reached highs of 92 in January and 93.8 in March. This accelerated depreciation follows a fragile path under emerging market capital outflows.
In terms of capital flow, the Reserve Bank of India and the Ministry of Finance are directing resources towards foreign exchange reserves intervention and attracting FDI, motivated by the need to stabilize the exchange rate to control import costs (especially for crude oil) while avoiding further foreign capital withdrawal that could impact the stock and bond markets. Resources are shifting from loose monetary policy to exchange rate defense.
Similar to the performance of the Rupee during the 2022 emerging market currency crisis and the differentiation of Asian currencies in 2025, India is currently in a phase of currency pressure transformation under high oil prices and a strong dollar, with early-export-oriented economies using reserves to buffer against shocks.
Essentially, this is about capital concentration: the depreciation of the Rupee shifts pricing power from domestic monetary policy to the global dollar cycle and capital flows, with the mechanism being that foreign capital outflows and an enlarged trade deficit amplify exchange rate pressure, forcing India to prioritize exchange rate stability over growth. In the long term, this may reverse through enhanced export competitiveness and FDI repatriation, but in the short term, inflation and corporate external debt costs are significantly pressured.
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The weaker the emerging market currency, the stronger the dollar pulls capital towards safe assets.
As oil prices rise and the dollar strengthens, the depreciation of the Rupee directly transfers import inflation to the domestic market.
Reserve intervention can stabilize in the short term, but structural exports and FDI are the true levers for long-term pricing power.