Summary:
The Indian Rupee nears record lows as trade tensions and weak sentiment push it toward its worst monthly performance in nearly three years.
The Indian Rupee is edging dangerously close to its historical low as global and domestic pressures continue to mount. Weighed down by deteriorating investor sentiment and renewed trade tensions with the United States, the currency is on track to record its worst monthly performance in nearly three years—marking it as Asia's weakest-performing currency so far in 2025.
The latest pressure point came after former U.S. President Donald Trump announced plans to impose a minimum 25% tariff on Indian exports, further souring market sentiment. This protectionist move sparked a fresh wave of risk aversion, driving the Indian Rupee lower, and triggering broader market weakness. The NSE Nifty 50 index fell 0.9% in the aftermath, reflecting investor concerns about India's export competitiveness and growth prospects.
As of the final week of July, the Indian Rupee has fallen over 2% against the US Dollar, making it the currency's sharpest monthly decline since 2022. If current trends continue, July 2025 could be recorded as the Rupee's worst month in nearly three years.
Goldman Sachs analyst Santanu Sengupta noted in a recent report that prolonged implementation of new US tariffs could shave off as much as 0.3 percentage points from India's GDP growth. This, combined with external vulnerabilities, may keep the currency under continued pressure in the near term.
Economists are warning of further downside risks for the Rupee. Dhiraj Nim, an FX strategist at ANZ Bank, indicated that if negative sentiment persists, the Rupee may gradually slide past the psychological level of 88 per US Dollar—a new threshold that would mark fresh record lows.
However, many analysts also believe the Reserve Bank of India (RBI) is closely monitoring the situation and is likely to intervene if depreciation continues at this pace. The central bank has previously shown a willingness to defend the currency against excessive volatility, especially when it threatens financial stability.
The recent plunge of the Indian Rupee is not merely a technical development; it reflects deeper concerns around trade friction, capital flows, and macroeconomic resilience. While the possibility of central bank intervention may cap the extent of near-term weakness, the broader direction will largely depend on geopolitical developments and investor confidence. With the Rupee nearing all-time lows, policymakers and market participants alike face the challenge of navigating through another period of external stress.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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