India's rupee falls to new record low against USD.

India's rupee falls to new record low against USD.

The Indian rupee has reached a new record low against the U.S. dollar, sliding to 88.36 on September 9, 2025. This marks the lowest point the rupee has ever reached, surpassing its previous all-time low of 88.33 set on September 1. The currency depreciation was driven by concerns over potential U.S. tariffs on Indian imports, which have led to significant selling pressure from foreign investors .

The Reserve Bank of India (RBI) is believed to have intervened to stabilize the currency, preventing sharper losses. Traders cited strong buying from foreign banks amidst speculation about ongoing tariff pressures on India from the U.S. The "spike on USD/INR was caused by worries of higher tariffs on India but state-run banks stepped in over 88.30 to cap losses, most likely on behalf of the Reserve Bank of India," a senior trader at a bank said .

Analysts at YES Securities, however, see limited downside for the rupee from current levels. They believe the recent weakness in the Indian rupee is not a cause for concern, as it reflects U.S. tariff-driven sentiment rather than a deterioration in India’s underlying fundamentals. The real effective exchange rate (REER) stood at 100.07 at the end of July 2025, which is well below its long-term average, suggesting the rupee is not structurally overvalued .

The domestic currency has faced significant pressure since U.S. President Donald Trump imposed additional tariffs on Indian imports, effective August 27, 2025. Forex traders began piling up dollars amid concerns that a hit on U.S. exports could cut $20–30 billion from shipments, shaving 40–50 bps off India’s real gross domestic product (GDP) growth. Despite this, the US-India strategic ties remain intact, and negotiations continue, making it plausible that secondary tariffs will eventually be rolled back to more sustainable levels .

The Reserve Bank of India (RBI) expects India’s CPI inflation to average around 3.1 per cent in the current financial year (FY26). An eight-year retail inflation of 1.5 per cent in July 2025 may lead to a downward revision in projection. Additionally, the ongoing tariff-related pressures may prompt the RBI to implement a 25-basis-point rate cut during the remainder of FY26 .

Robust services exports and benign crude oil prices are expected to cushion the impact on tariff-hit merchandise exports to the U.S., keeping the current account deficit (CAD) comfortably below 1 per cent of GDP. India's foreign exchange reserves stand at a record $694 billion, providing a sufficient buffer. Furthermore, the U.S. Federal Reserve's dovish pivot and expected cuts in the repo rate should attract foreign portfolio inflows into Indian bonds and equities, easing funding pressures and giving the rupee room to rebound .

In conclusion, while the Indian rupee has reached a new low against the U.S. dollar, analysts remain optimistic about its potential for stabilization and rebound, supported by strong macro fundamentals and ongoing negotiations between India and the U.S.