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Informist, Monday, Sept. 1, 2025

 

By Pratiksha

 

NEW DELHI – The rupee may depreciate against the US dollar for the fifth consecutive month in September due to lingering concerns around the impact of US tariffs on the Indian economy. According to the median of estimates by 14 respondents from banks, corporations, and brokerages polled by Informist, the Indian unit may settle at 88.55 a dollar by the end of September, against 88.20 at the end of August. The rupee fell to a lifetime low of 88.3300 a dollar Monday before settling at 88.1950.

 

The Indian currency fell 0.7% against the dollar last month as the additional 25% US tariff on India came into effect on Aug. 27. US President Donald Trump has slapped the additional 25% punitive tariff on Indian goods as punishment for buying crude oil from Russia, on top of a 25% reciprocal tariff announced earlier.

 

"Indian rupee will continue to remain under pressure as steep imposition of tariffs from the US and outflows from FPIs weigh on the sentiment," said Gaurav Sharma, associate vice-president and head of research at Globe Capital Market Ltd. "Tariff impact on various sectors and widening trade deficit will add further pressure on the local currency."

 

With exports expected to slow on the back of higher US tariffs, India's trade deficit is likely to widen, putting pressure on the current account and, thus, the rupee. India's merchandise trade deficit already widened to an eight-month high of $27.35 billion in July.

 

Moreover, with tariffs clouding the outlook of India's GDP growth and corporate earnings, foreign portfolio investors have already started pulling out funds from Indian equities. Market participants expect this trend to continue and exert downward pressure on the rupee this month and beyond, poll respondents said.

 

A median of estimates of 12 respondents sees the rupee falling to 88.65 by December-end. In August, FPIs withdrew $3.29 billion worth of funds from domestic equities.

 

"Hitting 90 per dollar in the near term is not unthinkable (for the rupee)," said Arvind Kanagasabai, executive vice-president of the integrated treasury department at Tamilnad Mercantile Bank. "The tariffs will start creating trade imbalances, and the weaker currency will be important for exporters to keep competing in the international markets." 

 

There has been no positive development in the India-US trade deal negotiations ever since the announcement of the punitive tariffs. Most poll respondents expect some respite for the Indian currency only if India-US trade tensions ease. After market hours Monday, Trump fired a fresh salvo, calling trade with India so far a "totally one-sided disaster". He said India has now offered to remove tariffs on imports from the US but should have done so "years ago".

 

Adding to bets stacking up against the rupee, most market participants expect the Reserve Bank of India to let the rupee weaken as it may help to cushion the blow to exporters from the US tariffs. A weaker rupee would make Indian exports competitive and potentially offset at least some of the impact of the tariffs, they said. Of the 14 poll respondents, six see the rupee testing the psychologically-important 89-per-dollar mark this month. One even sees it falling to the next big figure of 90.

 

"RBI's intervention is likely to remain limited in the coming weeks," said Amit Pabari, managing director at CR Forex. "The central bank may prefer to let the rupee reflect external pressures more freely rather than expending reserves to defend a particular level. External headwinds--particularly from tariffs and sustained foreign outflows--remain significant, and resisting them entirely could prove both costly and ineffective. As a result, RBI will probably step in only when volatility becomes excessive, while allowing the broader depreciation trend to play out naturally." 

 

Amidst all the negativity, sustained weakness in the dollar index may act as a silver lining for the rupee, market participants said. The dollar index, which measures the strength of the greenback against six major currencies, fell over 2% last month on growing expectations of a rate cut by the US Federal Reserve in September. Fed funds futures traders see an 89.7% probability of the Fed lowering interest rates by 25 basis points this month, according to the CME FedWatch tool.

 

Going by the current market sentiment, however, the only thing that may turn the tide in favour of the rupee completely is a positive development on the US tariff front. Everything else may be only a temporary helping hand.

 

POLL DETAILS

 

Participant	Sept-end	Dec-end
ANZ Bank India	88.70	89.00
CR Forex	88.00-89.00	87.00-88.00
CSB Bank	87.90	87.50
Finrex Treasury Advisors LLP	88.25	88.75
Globe Capital Market	87.60-89.00	86.40-89.20
HDFC Securities	88.60	88.90
IBM India	88.60-89.00	89.60
ICBC India	88.75	90.00
ICICI Bank	87.75-88.00	88.00-88.50
IDFC FIRST Bank	89.00	-
Large state-owned oil company	87.70	86.75
Mecklai Financial Services	88.75	-
Shinhan Bank India	87.40-89.20	87.60-89.50
Tamilnad Mercantile Bank	90.00	90.00-90.25
Median	88.55	88.65

 

 

End

 

US$1 = INR 88.20

 

With inputs from Gowri Lakshmi and Aaryan Khanna

Edited by Rajeev Pai

 

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