INR Crashes to Fresh Record Lows Amid Ongoing Tariff Tensions

The Indian rupee (INR) has hit unprecedented lows, breaching the 88-mark against the US dollar and closing at 88.47 (provisional) on September 11, 2025, marking a sharp decline of 36 paise in a single day. This plunge, driven by escalating trade tensions between India and the United States, has sent ripples through financial markets, raising concerns about India’s economic stability and trade outlook. In this blog, we explore the reasons behind the rupee’s fall, its implications, and what lies ahead for Asia’s third-largest economy.

Why Is the Rupee Falling?

The primary catalyst for the rupee’s decline is the imposition of steep US tariffs on Indian goods, which began on August 27, 2025. The US, under President Donald Trump, imposed a 50% tariff (split evenly between general and additional duties) on Indian exports, targeting sectors like textiles, leather, footwear, and shrimp. This move has significantly impacted India’s trade prospects and investor confidence, contributing to the rupee’s vulnerability. Here are the key factors driving the INR’s slide:

1. US Tariff Pressures:

   • The punitive tariffs have disrupted India’s export-driven sectors, which account for a significant portion of its trade revenue. The high duties make Indian goods less competitive in the US market, reducing export demand and straining India’s trade balance.
   • Ongoing tariff negotiations between India and the US remain unresolved, adding uncertainty to the economic outlook.

2. Foreign Fund Outflows:

   • Foreign portfolio investors (FPIs) have withdrawn substantial sums from Indian markets, with $11.7 billion pulled out from debt and equity markets in 2025 so far, including $1.4 billion in September alone. This capital flight has weakened the rupee further.

3. Strong US Dollar:

   • The US dollar index, which measures the dollar’s strength against six major currencies, rose to 97.94 on September 11, 2025, recovering from a seven-week low. A stronger dollar, fueled by anticipation of US inflation data and potential Federal Reserve interest rate decisions, exerts downward pressure on the rupee.

4. Rising Crude Oil Prices:

   • Brent crude prices, a key factor for India’s import bill, have climbed in recent sessions, reaching $67.42 per barrel (down slightly by 0.10% on September 11). As a net oil importer, India faces increased pressure on its current account deficit, further weakening the INR.

5. Domestic Market Sentiment:

   • Weak domestic equity markets and selling pressure from foreign institutional investors (FIIs) have dented investor confidence, contributing to the rupee’s negative bias.

The Reserve Bank of India’s Response

The Reserve Bank of India (RBI) has taken a cautious approach to managing the rupee’s decline. While it has intervened by selling dollars around the 88.20 level to curb excessive volatility, the RBI appears reluctant to aggressively dip into its $690.72 billion foreign exchange reserves. Analysts suggest the RBI is allowing a controlled depreciation to support exporters, as a weaker rupee makes Indian goods cheaper for foreign buyers, partially offsetting the impact of US tariffs. For instance:

• On September 1, the rupee hit an intra-day low of 88.33 and settled at 88.20.
• By September 11, it closed at 88.47, reflecting limited intervention to prevent sharp swings rather than defending a specific level.

The RBI’s strategy balances short-term stability with long-term export competitiveness, but analysts warn that persistent tariff pressures could push the rupee to 89 by early 2026 if trade tensions escalate.

Economic Implications

The rupee’s record lows have far-reaching consequences for India’s economy:

1. Exporters vs. Importers:

   • Exporters: A weaker rupee benefits exporters by making their products more competitive globally, partially mitigating the impact of US tariffs. Sectors like IT and pharmaceuticals may see gains.
   • Importers: Higher import costs, especially for crude oil and electronics, increase expenses for businesses and consumers, potentially fueling inflation.

2. Inflation Risks:

   • Rising crude oil prices and a weaker rupee could drive up fuel and commodity prices, impacting household budgets and industrial costs. However, the RBI’s recent bulletin noted a benign inflation outlook in the near term, offering some relief.

3. Investor Confidence:

   • The $11.7 billion FPI outflows in 2025 reflect dented investor sentiment. The rupee’s weakness, coupled with tariff uncertainties, may deter further investment unless trade negotiations yield positive outcomes.

4. Trade Deficit:

   • The US tariffs exacerbate India’s trade deficit, as reduced export revenues strain foreign exchange inflows. This could further pressure the rupee if not addressed through policy measures.

Government and Policy Response

The Indian government is actively responding to the crisis:

• GST Reforms and Tax Cuts: Prime Minister Narendra Modi has introduced consumption tax cuts to stimulate domestic demand and cushion the impact of tariffs. Optimism around GST reforms has slightly buoyed Indian equity markets, with the BSE Sensex rising 123.58 points to 81,548.73 and the NSE Nifty gaining 32.40 points to 25,005.50 on September 11, 2025.
• Export Support Measures: Commerce and Industry Minister Piyush Goyal announced plans for a ₹20,000 crore export mission, alongside liquidity support and Special Economic Zone (SEZ) relaxations, to aid exporters affected by tariffs.
• Trade Negotiations: Both India and the US are working to resume talks to address trade barriers, with hopes of reducing tariffs or finding alternative trade agreements.

What Lies Ahead?

The rupee’s trajectory depends on several factors:

• US Inflation Data and Federal Reserve Decisions: Investors are awaiting August 2025 US consumer inflation data, which could influence Federal Reserve rate cuts. A rate cut could weaken the dollar, offering some relief to the rupee.
• Trade Negotiations: Successful talks could lower tariffs, boosting India’s export outlook and stabilizing the rupee.
• Global Economic Trends: Rising crude oil prices and global uncertainties, including US trade policies, will continue to influence the INR.

Analysts, such as those from MUFG, predict the rupee could weaken to 89 by Q1 2026 if tariffs remain high, though a reduction to 25% next year could ease pressure. Meanwhile, posts on X reflect mixed sentiments, with some users seeing the rupee’s fall as a temporary setback and others expressing concern over market volatility.

Tips for Individuals and Investors

1. For Consumers:

   • Be prepared for potential price hikes in imported goods, fuel, and electronics due to the weaker rupee.
   • Explore budgeting strategies to manage rising costs, such as prioritizing locally produced goods.

2. For Investors:

   • Monitor US-India trade developments and Federal Reserve announcements for cues on rupee movement.
   • Consider sectors like IT and pharmaceuticals, which may benefit from a weaker rupee, for investment opportunities.
   • Consult financial advisors to navigate market volatility and diversify portfolios.

3. For Businesses:

   • Importers should hedge forex exposure to mitigate losses from a falling rupee.
   • Exporters can leverage the weaker INR to boost competitiveness but should stay updated on tariff negotiations.

Conclusion

The Indian rupee’s crash to a record low of 88.47 against the US dollar on September 11, 2025, underscores the challenges posed by US tariffs, foreign fund outflows, and global economic pressures. While the RBI’s measured interventions and government initiatives like GST reforms and export support offer hope, the road ahead remains uncertain. By staying informed and adapting to these economic shifts, individuals, investors, and businesses can better navigate the impact of the rupee’s decline.

For the latest updates, follow trusted sources like Business Standard, India Today, or Financial Express. As India works to strengthen its trade position and economic resilience, the rupee’s story is far from over.

Sources: Business Standard, Business Today, India Today, Financial Express, Telegraph India, Onmanorama, X posts,,

Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Consult a financial advisor for personalized guidance.