Use global funds and gold to hedge against currency risk

RUPEE’S DEPRECIATION AGAINST DOLLAR

- KARTHIK JEROME

The rupee recently crossed the 90 level against the United States (US) dollar, reinforcing a long-term trend of gradual depreciation.

For Indians with future spending goals denominated in foreign currencies — such as children’s overseas education, international travel or medical treatment abroad — this weakening can have a significant impact. Investors must account for currency depreciation in their financial plans and use instruments that can cushion the erosion in purchasing power.

Key drivers

A widening trade deficit has been one of the principal factors that has weakened the Indian rupee. “Record gold imports have contributed in a big way,” says Sachin Jain, managing partner, Scripbox.

Merchandise exports — particularly to the US — have softened. “Analysts expect India’s current account deficit to rise to 1.4 per cent of gross domestic product (GDP) in FY26 compared to 0.6 per cent in FY25,” says Karan Aggarwal, co-founder and chief investment officer (CIO), Elever.

Risk-off sentiment globally has added to the pressure. Foreign institutional investors (FIIs) have been persistent sellers due to concerns around India’s earnings growth and valuations, withdrawing about ₹1.55 trillion (about $17 billion) in 2025 so far. This has put further strain on the currency.