The Indian rupee has depreciated to 88 rupees per dollar

The Indian rupee’s depreciation continues unabated. It’s at a record low against the dollar and among the weakest major currencies. High tariffs resulting from the deteriorating relationship between India and the Trump administration are taking a toll on the rupee. Furthermore, visa issues are weighing on the rupee, making it difficult to predict a reversal of its upward trajectory.

In late September, the Indian rupee depreciated to 88 rupees per dollar in the foreign exchange market, hitting a new all-time low. Even amid growing expectations of US interest rate cuts and a sell-off in the US dollar, the rupee’s depreciation has not slowed. It is currently hovering near its low.

Compared to April 1, before the Trump administration announced reciprocal tariffs, the rupee has fallen 3.6% against the dollar, the weakest performance among major Asian currencies. Even compared to the yen, which is at its lowest point against the euro and Swiss franc, the rupee’s weakness is significant.

One factor casting a shadow over the rupee’s exchange rate is the US’s tough stance toward India. In late August, as part of sanctions against Russia, the US government imposed a 25% “additional tariff” on India, which has been importing Russian crude oil. Combined with the previously implemented 25% tariff, the rate reaches 50%, meaning India will be subject to the world’s highest tariff.

Furthermore, US work visa restrictions are also weighing on the rupee. On September 19th, US President Trump decided to impose a $100,000 processing fee on the H-1B visa for highly skilled foreign workers.

Seventy percent of those granted these visas are from India. Major Indian IT companies have grown by expanding their business model by exporting software developed in India overseas, and many of their system development and maintenance personnel have moved to the US. World Bank statistics show that remittances from overseas account for over 3% of India’s GDP.

Hirota Hirayama, chief economist for emerging markets at SMBC Nikko Securities, stated that if the flow of talent from India to the US decreases, “domestic Indian businesses that receive project orders from US communities will also be negatively impacted.” If the current account deficit widens due to reduced remittances, the rupee’s depreciation will persist for a long time.

Visa issues are also creating headwinds for the rupee from another perspective. This is because the IT industry, which plays a major role in the Indian stock market, has come under downward pressure on its share prices.

Indian IT companies’ business models are based on profits in the United States. These companies rely on Indian engineers traveling to the US, and increased visa costs will contribute to worsening earnings.

Anticipating worsening performance, investors are taking action. Major IT services stocks such as Tata Consultancy Services and Infosys Technologies were heavily sold off, leaving the Nifty IT index, which comprises IT stocks, down 14% at the end of September compared to three months earlier.

The sell-off in IT stocks, which have a large market capitalization, will affect the entire Indian market. Data from the National Securities Depository of India (NSDL) shows that net selling by overseas investors will reach approximately 1.6 trillion rupees by early October 2025, increasing at the fastest rate since 2002. Toru Nishihama, chief economist at Dai-ichi Life Research Institute, said, “Investors are questioning the credibility of India’s economic growth path.”

The Indian government is expected to actively intervene to stabilize the exchange rate. The rupee’s depreciation is being curbed through transactions based on financial derivatives known as non-deliverable forwards (NDFs).

Hasegawa Hisago, a market economist at Mizuho Bank, said, “By making full use of NDFs, exchange rate fluctuations are being curbed without depleting foreign exchange reserves. This appears to be a preserving of foreign exchange for future intervention.”

However, some believe the rupee will continue to depreciate due to the ongoing tensions in US-India relations and visa issues. Capital Economics, a UK-based firm, notes that a decline in IT-related remittances will have a medium-term impact, predicting that the rupee will depreciate further to around 90 rupees per dollar by 2026.

Hiroyama of SMBC Nikko Securities stated, “It’s difficult to identify factors that could reverse the rupee’s decline. Due to the widening current account deficit, the rupee’s exchange rate is likely to continue its slow depreciation. If currency depreciation leads to inflation and, in turn, monetary tightening, this could also have an impact on stock prices and other factors.”