INR vs USD: What Matters To Reverse Rupee's Depreciation? - Explained

Ahead of PM Modi and Russian President Putin's meeting, the rupee continued to decline to hit a new all-time low of Rs 90.43 on December 4, after having surpassed the 90 mark against the USD on December 3.

Financial services veteran Paramdeep Singh said, "The rupee’s decline is being driven by a stronger US dollar, elevated US Treasury yields, and sustained foreign outflows from emerging markets."

Sharing his view on the rupee downswing, Prashant Mishra, Founder and CEO, Agnam Advisors, said, “The Indian Rupee has slipped below 90 against the US dollar, touching a new low of around 90.43. This slide isn’t happening in isolation. Foreign investors have pulled out nearly $17 billion from Indian markets this year, trade talks with the US have stalled especially with America imposing steep tariffs of up to 50% on Indian products and our import bill remains high due to oil and other essential goods. Put together, these pressures have turned the rupee into Asia’s weakest currency this year, even though India’s economy continues to grow strongly.”

Also Read: Rupee Hits Record Low, Forward Premiums Surge On Weakening Bias

Which Key Factors Could Trigger A Rupee Appreciation?

"Over the next quarter, any reversal will depend on crude prices, export momentum, and continued RBI intervention to manage volatility. India’s healthy forex reserves, resilient growth, and relatively well-contained inflation provide an important cushion," Singh said.

"I believe the currency will stabilise once global risk sentiment improves and the US rate cycle shows clearer signs of easing," he said.

Meanwhile, for long-term investors, the rupee's movement "reflects global financial conditions more than domestic weakness, and it reinforces the case for calm, sensible currency diversification rather than panic, according to the Founder of Longtail Ventures.

On the possibilities of a upswing movement in rupee, Mishra said, “There is room for a turnaround. If India and the US manage to close a trade deal by the end of this year or early 2026, and tariffs are brought down to more reasonable levels, capital could start flowing back into India. A decline in US bond yields could also take the shine off the dollar and help the rupee recover. If none of this happens soon, the currency may settle around 92, especially since the RBI seems comfortable allowing a slow and orderly depreciation as long as it avoids wild swings.”

“In the short term, the fall may cool off if the RBI steps in by selling dollars from its reserves, something it has done before to prevent sudden crashes. Looking ahead, to avoid a rise in prices caused by a weaker rupee especially for imported fuel and commodities. RBI has a few tools it can use like adding liquidity through open market operations, increasing the cash reserve ratio to absorb excess foreign inflows, or tightening rules around importing non-essential items,” he said. 

On the government’s side, “boosting export benefits and widening our trade relationships beyond the US would help strengthen foreign exchange inflows and reduce pressure on the rupee,” he added.