Indian rupee shows modest recovery; should expats remit now? 

Indian expats residing in the UAE are undoubtedly monitoring the recent pullback in the USD/INR currency pair, which has fallen from a peak of 88.87 to 87.80 as of now. This marks the rupee’s longest stretch of gains since June and has further room to run after the Reserve Bank of India (RBI) signaled a willingness to intervene in the FX markets to defend the currency. 

The rupee was trading at 23.92 per UAE dirham on Thursday, up from 24.20 on October 9. Against the US dollar, the currency has tried to breach the 88.80 level several times in recent weeks, but it has been in vain. The Indian rupee (INR) has shown signs of resilience against the US dollar over the past month, recovering slightly from its record lows earlier this year. However, analysts caution that the currency faces persistent headwinds and may remain under pressure through the remainder of 2025.

Recommended For You

Dubai: Indian teen dies after falling from building while taking photos

UAE: Why mixed-use communities are more profitable than standalone buildings

Djokovic says Sinner's doping controversy will linger

Children help design Dubai's first Hewi community space to be unveiled in January 2026

Sri Lanka cricketers leave Pakistan after bomb blast

 

In October, the rupee strengthened by approximately 0.28 per cent, trading around Rs88.06 per dollar as of October 21. This modest recovery was largely attributed to intervention by the Reserve Bank of India (RBI), which conducted multiple dollar-selling operations to curb speculative positions and stabilize the currency.

The INR/US dollar exchange rate fluctuated between Rs87.95 and Rs88.81 during the month, with the rupee hitting a one-month high amid RBI support and reduced dollar demand from importers. Despite this uptick, the rupee remains down 4.72 per cent year-on-year, reflecting broader macroeconomic challenges.

The central bank’s active role in the forex market helped stem the rupee’s decline, though its long-term impact remains limited. On the other hand, steep tariffs on Indian exports and tighter immigration rules in the US have weighed on investor sentiment. Persistent selling by foreign institutional investors (FIIs) continues to exert pressure on the rupee. In addition, surging gold prices have increased India’s import bill, further straining the currency.

Moreover, India’s real-effective exchange rate (REER) – a metric of how the degree of undervaluation or overvaluation in the rupee relative to the inflation differentials among India’s prominent trading partners – has plunged lately, analysts say.

Earlier this year, when most Asian currencies were rallying, the rupee’s 3 per cent slump stuck out like a sore thumb. It reflected India’s susceptibility to trade tariffs and other US policies, such as higher H1B visa thresholds, accompanied by foreign investors pulling out of local equities at a swift pace. As a result, the RBI added $15 billion worth of net short US dollar  to its reserves this month. Additionally, the central bank supplied Rs1.62 trillion through two rounds of variable rate repo actions, totaling $18.4 billion. “The RBI is using USD/INR FX swaps to infuse rupee liquidity in the system. Moreover, the increased likelihood of a U.S.-India trade deal in November is also lending support to the rupee as it could strengthen investor confidence and attract foreign inflows to India. However, the U.S. takes about 18 per cent of India’s exports, double the 9 per cent for the UAE, which comes in second place. Therefore, policy headlines from Washington could influence the currency’s immediate trajectory,” Vijay Valecha, Chief Investment Officer, Century Financial, told Khaleej Times.

Another factor supporting the rupee includes its relatively elevated carry trade potential. In other words, India’s RBI repo rate is higher in both nominal and real terms at 5.50 per cent as of October 2025. Even if a 25-basis-point rate cut materializes in Q4 2025, India’s policy rate would remain at the top end relative to Asian peers, analysts say.

Forecasts for the rupee’s trajectory through December 2025 suggest continued volatility. Analysts expect the Indian currency to trade between Rs86.00 and Rs90.00 per USD, depending on global economic developments and domestic policy responses.

According to Trading Economics, the rupee is projected to settle around Rs87.75 by year-end, with a potential appreciation to Rs86.78 over the next 12 months. However, other models, including LongForecast and Traders Union, anticipate a gradual depreciation, citing factors. These include:

US Dollar Strength: A robust dollar, supported by high US bond yields and limited Fed rate cuts, continues to attract capital away from emerging markets.

India’s Trade Deficit: A widening trade gap, driven by energy imports, is expected to keep demand for dollars elevated.

Geopolitical Risks: Uncertainty around global trade policies and regional tensions could further impact investor sentiment.

RBI’s strategy and market sentiment

The RBI is expected to maintain an asymmetric intervention strategy, preventing sharp appreciation while allowing gradual depreciation to rebuild reserves. Market participants remain cautious, with some speculators eyeing a potential breach of the Rs90 per USD mark if current trends persist.

While the Indian rupee has shown short-term resilience, its medium-term outlook remains clouded by global and domestic challenges. Policymakers face a delicate balancing act: supporting the currency without stifling growth. For businesses and investors, hedging strategies and close monitoring of macroeconomic indicators will be crucial in navigating the uncertain terrain ahead.

“Technically, a trend-based Fibonacci extension connecting 19th August’s low of 86.92 with 25th September’s peak of 88.87 and extending it down to the recent swing low of 87.62 on 16th October indicates the presence of strong resistance at 88.85 and 89.60. Considering these factors, a further decline in USD/INR appears possible. So, expats wanting to remit money to India can consider doing so now before the currency pair weakens further,” Valecha said.

Somshankar Bandyopadhyay

• 

somshankar@khaleejtimes.com

Somshankar Bandyopadhyay is a News Editor with close to three decades of experience. Currently, he manages the business section, ensuring that the top economic and business news of the day reaches its readers.