With the rupee close to reaching Rs 100 to the dollar, everyone is interested and has a view on the exchange rate at the moment
With the rupee close to reaching Rs 100 to the dollar, everyone is interested in the exchange rate at the moment and has a point. Aside from opinions and expectations, what does the situation look like historically? HT has looked at the numbers to distill the good (there is), the bad and the ugly from the current turmoil in the foreign exchange markets at the moment. Let’s look at them one by one.
Good: Psychological thresholds aside, this is not the worst rupee withdrawal
The rupee-dollar exchange rate is as much a sentiment shaping factor as it is a tangible factor of the economy. These sentiments are certainly important because foreign exchange markets tend to enter into self-fulfilling spirals. It is precisely for this reason that the ongoing depreciation of the rupee is worrying, but it is not the worst that India has seen so far. HT conducted a historical analysis of episodes of rupee depreciation by first calculating the rupee’s depreciation over different periods—that is, one year, six months, three months, two months, and one month—using daily spot rupee rate data since December 1979. For each period, we classified the dates by the magnitude of the decline. After selecting a date with a significant decline, we removed nearby dates within the same time window to prevent calculating the same depreciation episode repeatedly. The latest date, Friday, has been kept separate so that the current decline in the rupee remains visible in the historical comparison even if it is part of an ongoing episode. The comparison shows that the current slide has not yet reached the level of the worst of India’s currency shocks, but neither does it constitute a normal bout of weakness. On a one-year basis, the rupee’s 11.2% decline was the 15th steepest decline in the data. The above events are mostly associated with more turbulent moments – for example, March 1992, when the one-year decline was 63%, March 2009 during the global financial crisis, when it was 29.82%, June 2012 at 27.24%, and August 2013 during the taper taper at 23.61%. Classifications with shorter periods are less worrisome. The latest decline ranks 24th over six months, 31st over three months, 99th over two months, and 132nd over one month. In other words, the rupee has been falling slowly enough to avoid panic – and the Reserve Bank of India appears to have played its part here – but long enough to emerge as one of the steeper annual declines.
Bad: The decline of the rupee stands out among other currencies…
Over the past 12 months, the rupiah has depreciated 11.2% against the dollar, more than the Philippine peso, Indonesian rupiah, South Korean won, Taiwanese dollar, Chinese yuan, Vietnamese dong and Thai baht in this comparison. It is also the worst performing year-on-year so far, with a decline of 6.9%. Since February 27, the start date of the war shock in West Asia, the rupee has depreciated by about 5%. Other Asian currencies have found protections that India lacked. The won and the Taiwan dollar have been supported by AI and semiconductor trade, although both economies have seen some foreign investor outflows in recent weeks amid fears of appreciation, while the yuan and Vietnamese dong have benefited from tightening currency management. The rupee is also being managed, but interventions by the Reserve Bank of India have only slowed the decline rather than reversing pressures from rising oil prices, equity outflows, and rising US yields.
…And this is not because of the dollar’s rise
The rupee’s fall cannot be explained as a simple case of dollar strength. Since the end of 2024, the broad dollar index, a trade-weighted measure of the dollar against the currencies of major U.S. trading partners, has fallen from 129.3 to 119.3, a decline of 7.7%. In short, the rupee weakened at a time when the dollar itself was not broadly strong. Therefore, the pressure must be found closer to home.
Ugly: Leakage occurs in capital flows, and oil is the accelerating factor
Viewing FII flows as a share of foreign exchange reserves makes the pressures more apparent, because it shows how large the flows are relative to India’s available dollar reserves. In March 2026, FII’s net outflows were equal to 1.98% of foreign exchange reserves, and the rupee average weakened by 2.34% from the previous month. April saw another outflow of 1.08% of reserves, and the rupee fell further. As of May 21, the outflow was smaller, but the rupee was still falling by 2.23%, indicating that oil and broader balance of payments pressures were starting to take their own toll. The comparison with good times is helpful. From March to June 2017, FII flows ranged between 0.94% and 2.32% of reserves, and the rupee appreciated sharply. In 2024 also, inflows between June and September helped keep the rupee broadly stable at Rs 83-84 per dollar. On the other hand, during the tantrum in 2013, FII outflows worth 2.5% of reserves in June 2013 coincided with a 6.17% monthly decline in the rupee. The current episode was not violent within one month, but it continued for a longer period. The problem is that the RBI cannot continue to manage the rupee if investor sentiment does not see a sustained recovery.
