Rupee fared better than Euro and Korean Won, remains least volatile among emerging economies: Sources

government sources said on Friday that the Indian rupee may have fallen to the 90 level against the US dollar, but it has managed to maintain its position more strongly than many of its emerging market counterparts.

Despite facing global challenges, including a stronger US dollar following the US Federal Reserve’s decision to cut the federal funds rate, the rupee has outperformed other currencies such as the euro, Japanese yen and Korean won this year, they said.

Citing the Reserve Bank of India’s latest assessment, officials said the decline in October was due to the strength of the dollar after the US Federal Reserve announced its decision to cut the federal funds rate.

According to the Reserve Bank of India’s November bulletin, “The depreciation of the rupee in October was due to the strength of the dollar following the US Federal Reserve’s announcement of a cut in the federal funds rate.”

The rupee’s relative stability is supported by India’s broader fundamentals – “stable inflation, resilient growth outlook for the Indian economy, narrowing current account deficit, steady services exports, strong private transfers and strong foreign exchange reserves,” the sources said.

They added that the movement of the rupee from April to November 2025 was in line with the movement of other currencies such as the Japanese yen and the Korean won. For the period April-November 2025, the depreciation of the Indian Rupee was -4.1%, a better performance than the Euro (-6.7%), Japanese Yen (-3.5%), and Australian Dollar (-3.4%).

Officials reiterated the central bank’s position that the value of the Indian rupee is determined by the market, with no specific target, level or range. They said the exchange rate still reflects a mix of global and domestic factors – the dollar index, capital flow trends, interest rate cycles, crude oil prices and the current account position.

According to government sources, the Reserve Bank of India is monitoring key developments around the world that may have an impact on the US dollar versus Indian rupee exchange rate. This includes monetary policy actions, key data releases, OPEC+ decisions, geopolitical events, and movements in G10 and emerging market currencies. They said the central bank’s interventions are only aimed at ensuring that the market functions in an orderly manner and “reducing unwarranted fluctuations in the Indian rupee”.

Steps taken by the Reserve Bank of India

The sources highlighted the measures taken in recent years to diversify foreign exchange flows. These include:

From January 2025, persons residing outside India with business interests in the country have been allowed to open a Special Non-Resident Rupee (SNRR) account “for the purpose of carrying out permissible current and capital account transactions with a person resident in India… and for carrying out any transaction with a person resident outside India”.

Fund transfer for all bona fide transactions between repatriable rupee accounts was permitted in January 2025.

On December 6, 2024, the Reserve Bank of India raised the maximum FCNR (B) deposit rate, allowing banks to offer higher interest rates on bagged deposits until March 31, 2025.

The operational framework issued in November 2024 allowed foreign institutional investors that breach the 10% limit to withdraw their investments or reclassify their holdings as foreign direct investment.

In May 2024, authorized traders were permitted to permit non-residents to open and maintain accounts in rupees or interest bearing foreign currencies “for the purpose of posting and collecting margin in India” for permitted derivatives contracts.

Payment for rupee based trade

The Monetary Policy Committee meeting in October 2025 introduced further measures to expand the international use of the rupee. Approved commercial banks can now lend rupees to non-residents of Bhutan, Nepal and Sri Lanka for business transactions.

Select currencies of India’s trading partners published by FBIL will be included to enable transparent reference exchange rates for the rupee.

Permissible uses of special rupee Vostro account balances will now include investment in government securities, corporate bonds and commercial paper – a move officials say is aimed at deepening rupee-based settlement systems.

The sources said these steps aim to improve access to rupee-denominated transactions while enhancing resilience to global repercussions, even as the currency remains under pressure in the near term.

The rupee on Friday gave up its initial gains and settled at 89.95 against the US dollar.