COULD THE RUPEE SEE A HASTY SLIDE TO 100?

In these Trumpian times, robust, broad based economic growth is the best counter

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A man walks past the rupee symbol outside the Reserve Bank of India headquarters in Mumbai. RBI and the government are working to facilitate greater use of the rupee in international trade.

(REUTERS)

Forecasting the rupee-dollar exchange rate is a tough ask at the best of times. In a world of Trumpian volatility, it is near impossible. Between 5 November 2024, when Donald Trump was reelected as the US president, and 21 October 2025, the rupee has lost over 4% against the US dollar. While that's a steep drop, it is nowhere close to the rupee's worst performance. On average, the rupee falls about 2-3% against the dollar annually; in crisis years, the depreciation is much higher. Yet, the current weakening of the rupee has generated a great deal of discussion and concern. This can be attributed to two reasons.

One, an exchange rate of 100 rupees to a dollar is an important psychological barrier: as the rate approaches 100, there is a sense that the rupee as a currency has collapsed. This is simply irrational.

To see why, consider past trends. In April 2008, the rupee was valued at about 40 to a dollar. By July 2014, about six years later, it was valued at 60—a 50% depreciation. More than a decade later, another 50% depreciation—which would push the rupee to 90—appears imminent. So, the weakening of the rupee has been steady and on-trend, rather than sudden and chaotic.

Two, the Indian economy is in decent health, with no obvious trigger for a sharp depreciation. Past episodes of rupee weakness have usually been caused by economic problems, both domestic and external. In 2009, the rupee depreciated by over 10% as the global financial crisis threatened growth and led to a pullout of foreign capital from emerging markets. The years of 2012 and 2013 saw low growth, high inflation, high fiscal and trade deficits, and the labelling of India as one of the “fragile five” nations.