Indian Rupee: Asia’s Worst Performing Currency

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Why in News?

In 2025, the Indian Rupee (INR) has depreciated by 4.3% CYTD (Calendar Year to Date) against the US Dollar, making it Asia’s worst-performing currency. Analysts warn that INR may touch ₹90 per USD if the India–US trade deal is delayed.

Description:

INR Depreciation (CYTD 2025):
  • INR has fallen 4.3% against USD
  • Comparatively: Indonesian Rupiah (IDR): –2.9%, Philippine Peso (PHP): –1.3%, Chinese Yuan (CNY): appreciated
Why is INR Weakening?
A.   Global Factors:
  1. US Dollar Strength: USD has appreciated 3.6% in 2 months due to Safe-haven demand and Higher US interest rates
  2. Strong Chinese Yuan (CNY) due to PBOC/SAFE intervention:
  3. SAFE: China’s State Administration of Foreign Exchange.
  4. PBOC: People’s Bank of China, China’s central bank.
B.   India-Specific Factors:
  1. Capital Outflows: INR weakness is driven more by capital outflows than the current account deficit.
  2. External Shocks:
    1. 50% U.S. tariff on Indian goods
    1. Surge in gold prices leading to:
      1. Higher gold imports
      1. October 2025 gold import bill at $14.72 billion
      1. Spike in demand for gold ETFs
  3. Record Trade Deficit:
    1. October 2025: $41.7 billion trade deficit
    1. Triggered rapid INR slide
  4. Merchandise Trade Deficit Pressure: Continuous trade imbalance adds downward pressure on INR.
Structural Comparison with Other Asian Currencies:
·        Better-Performing Currencies: Japanese Yen (JPY), Korean Won (KRW) & Chinese Yuan (CNY).
  • Even though these currencies have their own policy challenges, they have performed better than INR in 2025.
Key Terms:
  • CYTD (Calendar Year to Date): Performance from Jan 1 to present date.
  • Capital Outflows: Foreign investors pulling money out of Indian markets.
  • Spot Market: Market for immediate currency transactions.
  • The Current Account Deficit (CAD) occurs when a country’s imports of goods, services, and transfers exceed its exports.

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