The Reserve Bank of India (RBI), in its annual report released on Friday, noted that the Indian rupee traded with a depreciating bias in FY26, weakening nearly 10% as trade-related uncertainties, a widening merchandise trade deficit, the outbreak of the Iran–US conflict, and persistent FII outflows weighed on the currency.
In the first half of FY2025-26, the rupee initially strengthened amid a softening US Dollar Index and the suspension of reciprocal tariffs by the US, hitting a yearly high of Rs 83.75 against the dollar on May 2, 2025, the RBI noted. However, the currency soon came under pressure as border tensions flared, tariff concerns resurfaced, and FPI outflows intensified in the equity segment. By the end of H1 FY26, the rupee had declined 3.8%, closing at 88.79 against the US dollar.
