The Indian Rupee Declines Against the US Dollar amid Trade Uncertainties and Global Pressures
On July 25, 2025, the Indian Rupee fell against the US dollar, opening at 86.33 to the dollar, up 0.1% from its previous close of 86.4075, but continuing a downward trend. Due to a strong US dollar, global economic headwinds, and uncertainty surrounding US-India trade talks, the rupee fell to a record low of 86.36 earlier in the week. With the rupee breaking the crucial 86-mark, this decline highlights ongoing pressures on India’s currency. It represents a 0.47% drop over the previous month and a 3.18% decline over the previous year.
This depreciation is being driven by a number of factors. Capital outflows from Indian markets have increased due to a strengthening US dollar, which has been supported by higher US Treasury yields and expectations of fiscal expansion under the incoming Trump administration. On July 8, foreign institutional investors (FIIs) increased demand for dollars by selling ₹26.12 crore worth of stocks. With imports exceeding exports, India’s trade deficit—which is fueled by expensive imports like gold and crude oil—puts additional pressure on the rupee. The rupee’s purchasing power is being eroded by rising global oil prices, which are contributing to inflation. Brent crude is currently trading at $69.36 per barrel. Investor confidence has also been weakened by the weakness of the domestic equity market, with the Sensex down 0.19% and the Nifty down 0.25%.
In an effort to reduce volatility, the Reserve Bank of India (RBI) is actively intervening to stabilize the rupee by selling dollars from its historically high foreign exchange reserves. With possible US tariffs looming by August 1, analysts predict the rupee may test 86.50 to 86.80 if trade deal uncertainties continue. However, by making Indian exports more competitive internationally, a weaker rupee could increase exports, especially in the IT and pharmaceutical industries. On the other hand, it makes imports more expensive, which could lead to inflation and make it harder for businesses that owe money abroad.
The RBI’s managed floating exchange rate strategy seeks to strike a balance between stability and growth as India negotiates these difficulties. The future of the rupee is still unclear because of the global geopolitical tensions, such as the rivalry between the US and China and the conflict between Russia and Ukraine, which are contributing to market volatility. Will external pressures cause further depreciation, or will RBI interventions and possible trade breakthroughs stabilize the currency? The result will influence India’s economy in the coming months.
