Indian Rupee Faces Increased Depreciation Pressure Amid Trade Uncertainty and Central Bank Inaction

The Indian rupee is expected to face further depreciation pressure this week, with traders anticipating a potential move toward 90 per U.S. dollar. This development stems from a combination of persistent portfolio outflows, unresolved U.S.-India trade negotiations, and the Reserve Bank of India’s (RBI) perceived lack of intervention in the currency market. , signaling growing concerns among traders and analysts about its trajectory in the near term.

A sustained wave of foreign portfolio outflows has been a key driver of the rupee’s decline. Traders point to a loss of confidence in the currency due to the prolonged uncertainty surrounding the U.S.-India trade deal. With the U.S. maintaining high tariffs on Indian goods and delays in finalizing a mutually beneficial agreement, sentiment remains fragile. These outflows have accelerated the rupee’s depreciation, .

, despite the country's strong domestic economic fundamentals. While India’s equity markets have maintained a near-peak trajectory and growth indicators remain resilient, the currency continues to weaken against the U.S. dollar. Analysts highlight that the absence of a concrete trade deal and ongoing tariff pressures are key constraints on the rupee’s recovery.

The central bank has previously intervened to stabilize the rupee, , where it had been seen defending the currency in recent weeks. However, traders have noted a noticeable pullback in the RBI's support following the rupee’s recent break below that level. The central bank’s reluctance to intervene has led to a sharp drop in the currency, with some market participants describing the move as panic-driven, .

Governor has publicly stated that the central bank does not target a specific exchange rate and has emphasized that recent weakness reflects strong dollar demand. While India’s foreign exchange reserves remain robust, providing a cushion against external shocks, the lack of visible central bank support has left the rupee vulnerable to further declines, especially in the face of high import demand and continued outflows.

Looking ahead, traders anticipate the rupee to remain under pressure in the short term, . dollar. This range reflects the market's attempt to balance expectations for a trade deal with the ongoing pressures from import demand and global risk sentiment. Analysts caution that until a favorable trade agreement is reached, the rupee is unlikely to see a meaningful recovery. A resolution in U.S.-India trade negotiations could potentially reverse the current trend and offer some reprieve to the currency.

The market will continue to monitor the RBI’s stance and the evolution of trade discussions as key indicators for the rupee’s near-term direction. With both domestic and international factors at play, the coming weeks are expected to be pivotal in determining the currency’s stability.