Indian Currency Under Crisis: RBI's Intervention to Prop Up the Rupee

The Indian rupee, like many emerging market currencies, has come under significant pressure over the past several months. This has coincided with a period of sustained depreciation of the US dollar, which has been weakening since Donald Trump was sworn in as the 47th President of the United States on January 20, 2025.

- Dr. T. K. Jayaraman

This simultaneous volatility in both advanced and emerging economy currencies underscores the inherent vulnerabilities of a globalized and interdependent world—one characterized by free trade and the rapid movement of capital and labour. For India, which liberalized its domestic economy and opened up to global markets over the past three decades, the consequences of this interconnectedness have been both rewarding and risky.

The US Dollar's Slide

The US dollar index (DXY), which measures the value of the dollar against a basket of major currencies including the euro, yen, and pound, has been on a steady decline throughout 2025. From a high of 109.39 in January, it dropped to around 98.4 by September. A reading above 100 indicates a strong dollar; below 100, a weakening one. The fall reflects complex macroeconomic factors—ranging from fiscal imbalances and trade deficits to inflation, growth, and global confidence in the US economy.

Since the end of the gold standard in 1973, when President Nixon delinked the dollar from gold, the value of the greenback has depended on global confidence rather than tangible backing. A weaker dollar usually leads to higher oil prices, as crude remains the world’s alternative “safe” commodity. In recent months, however, despite the dollar's depreciation, oil prices have hovered around $62-64 per barrel, while gold continues to attract investors as a preferred store of value.

India’s Macroeconomic Indicators