India Rupee slumps to 5-months low. Will this trend continue?
Speaking to Times of Oman, R. Madhusoodanan, a financial expert based in Muscat said that the fall in Rupee since the beginning of this month, particularly the sharp fall on Monday on account of domestic and international reasons including geo-political reasons. Recently, Donald Trump had cautioned Russia to stop the war against Ukraine in a short span of 10 to 15 days as against his previous request of 50 days.
Failing the ceasefire, he cautioned that additional sanctions including secondary sanctions may be imposed on Russia and nations buying oil from Russia may be exposed to these secondary sanctions. This statement has created some kind of panic in the crude market which pushed the price of oil from $70 to $72 per barrel. India and China are the main buyers of Russian oil as it is relatively cheaper.
Also, there is no clarity on the import tariffs on Indian goods to US since the Indo-US trade treaty is still under negotiation and the deadline given by the Trump administration for deferment of the tariffs is 31st July.
Domestic reasons include the lower India's Index of Industrial Production (IIP) of 1.5% in June 2025 which is the lowest in the last 10 months, out flow from Indian stocks and shoring up of dollar by banks due to month end demand from importers.
The market is going to take cues from the Federal Open Market Committee (FOMC) of US Federal Reserve on Wednesday. Experts see no surprise announcements. The dollar index (DXY) is hovering around 98-99 levels, he further said.
The forex reserve of India dropped by $1.18 billion to $695.49 billion as on 19/7/2025, a third week straight decline.
"Credit off take not taking place the way the policy makers wanted despite 100 bps cut in the repo rates, The sluggish GDP growth, the negative impact of tariffs by US(currently India is trade surplus with US), stress on oil import. repayment obligations etc. due to INR Depreciation against USD are not positives for the Indian economy," he said.
"The above domestic and international reasons have impacted the Rupee movement. The weakness continues and even if it crosses the highest level of 88.10 recorded in February this year, I am of the view that there is nothing to worry much. Let the Exchange rate be market driven," Madhusoodanan said.
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