The Indian rupee extended its weakness on Monday, hitting a fresh intraday low of 88.33 per dollar before recovering on likely Reserve Bank of India (RBI) intervention. Dealers attributed the volatility to rising concerns over the United States’ decision to impose steep tariffs on Indian exports, along with persistent foreign portfolio investor (FPI) outflows.
Intraday movement and RBI support
After touching 88.33 per dollar in early trade, the rupee pared losses to settle flat at 88.20 against Friday’s close. Market participants said the recovery was aided by dollar sales from the central bank.
“The dollar remained well bid against the rupee for the entire day except for the afternoon session when it fell to 88.12 level on persistent selling by the central bank,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
With US markets shut for a holiday, thin trading volumes amplified volatility, giving even moderate flows the potential to trigger sharp moves.
Performance so far this fiscal
The local currency has depreciated 3.10 per cent in the current financial year to date. In August alone, the rupee slipped 0.69 per cent.
Analysts noted that the rupee has weakened against most major global currencies and currently ranks as the worst-performing currency among emerging markets in 2025.
Pressure from tariffs and outflows
Concerns remain that India’s trade deficit could widen following the Donald Trump administration’s decision to impose a 50 per cent tariff on Indian goods, one of the steepest globally. This, coupled with FPI outflows from equities and debt, has increased downward pressure on the currency.
“Rupee traded sideways near 88.18 as Friday’s sharp fall kept the weakness extended, with the currency moving in a narrow range between 88.10 and 88.30,” said Jateen Trivedi, VP research analyst, commodity and currency at LKP Securities.
Trivedi added that while GST reforms may emerge as the next domestic trigger, uncertainty over their timing and scope has kept traders cautious. “Persistent FII outflows are adding to downside pressure, keeping the rupee vulnerable within a broader range of 87.75–88.50,” he said.
Outlook
Currency strategists expect the rupee to remain under pressure in the near term, as global risk sentiment is weighed down by protectionist trade measures and geopolitical uncertainty. RBI intervention may continue to cap volatility, but structural pressures from tariffs, high crude prices, and capital outflows could limit any sharp appreciation.
The coming weeks will be closely watched for announcements on GST reforms and fresh trade talks, both of which could influence the trajectory of the rupee.