The Indian rupee has emerged as Asia’s worst-performing currency in 2025, on track for its largest annual decline since 2022, Bloomberg reported. The currency’s weakness this year has been driven by higher US tariffs on Indian exports and a significant withdrawal of foreign investment from local equity markets.
In a bid to stabilize the rupee, the Reserve Bank of India (RBI) sold more than $30 billion in foreign-currency assets since late July, successfully averting a new low in mid-October. However, the rupee fell to 89.4812 per US dollar on November 21, suggesting the central bank may have temporarily stepped back to conserve reserves amid delayed trade talks with the US. Analysts say potential improvements in US-India trade relations could ease pressure, but absent a deal, the RBI may need to intervene again.
The rupee first weakened in January before gaining slightly in March and April. It reached a peak of 83.7538 per dollar in early May amid optimism over a prospective US trade deal. That optimism ended in July when President Donald Trump announced higher-than-expected tariffs and threatened penalties on India for purchasing Russian energy and weapons. By August, the US imposed tariffs of 50% on most Indian exports, including an additional 25% levy linked to trade with Russia, driving the rupee to record lows above 88 per dollar.
Further depreciation followed in September after reports of US proposals to impose similar penalties via European nations and plans to raise fees for H-1B visas, heavily impacting Indian workers. The rupee’s decline was exacerbated by a flight of nearly $16.3 billion from Indian equities this year, approaching the record outflows of 2022.
RBI intervention, typically aimed at containing volatility rather than targeting a fixed rate, involves selling dollars from reserves or using offshore derivatives. The central bank’s reserves currently stand at around $693 billion, enough to cover about 11 months of imports. Bloomberg Economics estimates the RBI has spent approximately $32.8 billion defending the currency since July. The IMF recently reclassified India’s exchange-rate regime as a “crawl-like arrangement,” reflecting a gradual adjustment approach rather than aggressive intervention.
The rupee’s underperformance contrasts with other emerging Asian currencies, such as the Taiwan dollar, Malaysian ringgit, and Thai baht, which have strengthened this year due to lower US tariffs and current account surpluses. India’s persistent current account deficit and reliance on imports of oil, fertilizers, and electronics have also increased pressure on the currency.
A weaker rupee offers mixed effects: it boosts the competitiveness of Indian exports and raises the value of remittances from the country’s workers abroad—India received a record $137 billion in remittances in 2024—but it also increases the cost of essential imports, adding to domestic inflationary pressures.
