State Bank of India’s Research team has released the latest Ecowrap report titled:
“A Sliding Rupee is Not a Weak Rupee Even as it Breaches the Psychological Barrier of 90… Domestic Resilience Needs to Be Counter-Intuitive to Exogenous Forces.”
The Indian Rupee today crossed the psychologically crucial level of ₹90 per US Dollar, marking its quickest ₹5 depreciation in recent times and the second-fastest slide since the Taper Tantrum. In less than a year, the rupee has moved from ₹85 to ₹90, compared to earlier transitions which took several years.
The report highlights that the present depreciation is being driven by a trifecta of headwinds:
• Foreign portfolio outflows, particularly from equities
• Uncertainty surrounding the US–India trade agreement
• RBI moving away from intervention-driven currency control and focusing only on volatility management
Despite being the most depreciated major Asian currency since April 2025 (around 5.5%), the rupee remains one of the least volatile currencies, signifying underlying strength.
The ongoing trade tensions, including 50% US tariffs on Indian goods (higher than tariffs on China, Vietnam, Indonesia and Japan), may affect about USD 45 billion worth of Indian exports.
The report further states that the Real Effective Exchange Rate (REER) has slipped into its longest undervaluation phase, hitting a 7-year low in September 2025, indicating a softer and undervalued currency, supported by low inflation. The Nominal Effective Exchange Rate (NEER) has also declined significantly but is expected to recover in the coming months.
From July to October 2025, the merchant market recorded unprecedented excess USD demand of USD 102.5 billion. During this period, RBI is estimated to have intervened with USD 30 billion, while forex reserves slipped from USD 703 billion to USD 688 billion.
SBI Research expects that:
• The US–India trade deal may be concluded before March 2026, though interim uncertainty may continue to pressure the rupee
• RBI is unlikely to cut interest rates, as it may be interpreted as a defensive move to protect the rupee and may adversely affect market sentiment
The report concludes that a sliding rupee does not signify weakness, and currency management is not the primary mandate of an inflation-targeting central bank.
Source: SBI Research – Ecowrap, Issue No. 20, FY26