The Indian rupee is set to weaken further against the U.S. dollar. Concerns about a U.S.-led global trade war and a slowing domestic economy continue to weigh on the currency. A recent Reuters poll suggests the rupee will depreciate more than previously expected.
Despite the U.S. dollar losing about 3% this year, the Indian rupee has not seen a similar recovery. It has shifted from being one of Asia’s top-performing currencies in 2024 to one of the worst in 2025. Foreign investors have already withdrawn over $14 billion from Indian equity markets. This heavy outflow has added to the rupee’s decline.
The Indian rupee's weaken is partly due to ongoing trade tensions. The U.S. continues to impose and threaten new tariffs on its trading partners, including India. As a result, uncertainty in global markets is rising. Analysts believe this pressure will persist, keeping the rupee under strain.
Market projections show the rupee falling by over 1% to 87.88 per dollar in the next three months. By February 2026, it could reach 88.30 per dollar, marking a decline of about 1.4% from current levels. This would extend the rupee’s losing streak to its longest in over two decades.
The Reserve Bank of India (RBI) has stepped in to slow down the rupee’s decline. However, interventions have been limited since December 2024, following the appointment of new RBI Governor Sanjay Malhotra. Some analysts believe the RBI’s reduced efforts have allowed further depreciation.
Additionally, the RBI has been focusing on rebuilding foreign exchange reserves. Even if capital inflows increase, analysts expect the central bank to absorb them to strengthen its reserve holdings. This strategy could restrict any strong rupee recovery in the near term.
Analysts at Maybank noted that expectations for the rupee’s resilience have changed. Initial predictions assumed the rupee could withstand potential trade policy shifts. However, with ongoing tariff threats from the U.S., India’s currency outlook has weakened.
Concerns over slow economic growth and restrictive U.S. trade policies continue to weigh on the rupee. Unless global trade conditions improve, the currency is likely to remain under pressure.
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The Indian rupee weakens further as global trade tensions and economic concerns mount. Analysts predict continued depreciation in 2025.
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