Indian rupee falls to 88.7 against US dollar:H1-B visa, US tariff and oil import woes responsible for rupee’s latest fall?

On Wednesday, September 24, 2025, the rupee fell by 7 paise in early trade to 88.80 against the US dollar, pressured by tariffs, H-1B visa issues, and ongoing foreign fund outflows.It opened at 88.80 and briefly touched 88.71. Let’s understand what fuelled the rupee to hit the fresh low and how the RBI will manage the depreciation of the rupee in today’s why and how… Why is the Indian rupee falling? The rupee settled at a fresh low of 88.7975 against the US dollar on 23 September from an all-time low of 88.82 in intraday trade. In 2025 alone, the rupee depreciated by 3.5% against the dollar, making it the worst-performing in Asia. This sharp fall coincides with the continuous outflow of foreign investments from the Indian equity market and increased oil prices in the international market. The fall of the Indian rupee was expected due to the new visa fee hike and the previous 50% tariff announcement on Indian imports by the US administration. It posed a threat to the country’s entire IT sector and the remittances received from Indian professionals working in companies like Amazon, Tech Mahindra, TCS, Google, Meta etc. in the US. According to an estimate by HSBC, as quoted in Reuters, 5.4 million Indians in the U.S. cumulatively send back about $33 billion in remittances to the country each year. There are about 80,000 new visa applicants each year, and if they were not to get entry, remittance inflows could fall by about $500 million. The double whammy of tariffs and the H-1B visa fee hike forced the rupee to hit the low. The hike in H-1B visa fees sparked worries over remittances and potential equity outflows from India’s IT sector. Overall, in the last three months, domestic equity FPI outflows have been worth ₹60,000 crores, backed by global trade uncertainties, while India-US tariff uncertainty continues to prevail, said Kunal Sodhani, head of treasury at Shinhan Bank. How is the value of the rupee determined? The rupee’s value is not dependent on a single factor. It is mainly dependent on demand and supply in the foreign exchange market. It is market-driven and managed and controlled by the Reserve Bank of India. Some of the factors influencing the value of Indian currency: How does the depreciation of the rupee affect the economy? A weaker rupee means costlier imports, which may widen the current account deficit. This, in turn, can push up domestic inflation through higher crude oil prices. The indirect effects could include a fall in foreign exchange reserves and foreign investors withdrawing from the stock market. Is it the first time that the rupee is falling? This is not the first time that the rupee has fallen like this. If we look at past trends, the rupee has fallen more or less similarly. Long-term data shows that from 2000 to 2004 the rupee weakened by an average of just 0.4% a year. After 2005, depreciation picked up sharply, averaging 3.4% annually between 2005 and 2014. From 2015 to 2025, the pattern persisted, with the rupee falling by about 3.5% a year on average. How will the rupee move in the coming days? Experts believe India will be more affected than others by the H-1B visa fee hike, given its dominant share of applicants. Currency dealers noted that while the Reserve Bank of India likely intervened to curb volatility, its involvement was limited. According to Reuters, the central bank was suspected of selling dollars through state-owned banks around the 88.50 mark to support the rupee before letting it weaken further. RBI was conspicuous by its absence in the fall of the rupee, probably trying to help exporters to some extent to mitigate the after-effects of the tariffs on Indian exports, said Finrex Treasury Advisors. With India-US trade talks yielding no clear results, treasury officials and dealers warn that the rupee could soon touch 89 against the dollar. What caused the devaluation of the rupee over the years? The rupee fell sharply due to some major events that happened in the past. 1960s–70s: War and Oil Crisis The rupee faced heavy fluctuations due to global instability, fiscal deficits, and high inflation. Food shortages and the 1962 and 1965 wars pushed up government spending, drained forex reserves, and forced a devaluation from ₹4.76 to ₹7.57 per dollar. The 1970s oil crisis further strained the currency through rising import bills and trade deficits. 1990s: Liberalisation Era A severe balance of payments crisis in 1991 left reserves barely enough for three weeks of imports. India devalued the rupee twice in July that year, bringing it to ₹24.5 per dollar. Liberalisation and globalisation reforms followed, with the RBI managing volatility through swaps and reserve management. New security features in banknotes and a digital push modernised the currency. 21st Century: Global Integration The rupee became one of the 15 most-traded currencies, supported by currency swap agreements. The 2008 global financial crisis and the 2010 recession caused sharp depreciation, showing India’s vulnerability to global shocks. Covid-19 in 2020 triggered volatility as foreign investment withdrew, but India’s swift policy response aided recovery. Financial reforms, including currency futures and options, have strengthened resilience. Today The rupee’s future remains tied to India’s growth ambitions, with inflation, oil prices, trade balances, and geopolitics continuing to shape its trajectory. US 50% tariffs on Indian exports, along with the H-1B visa hike, further accelerated the devaluation of Indian currency. Foreign investors opting out of the Indian equity market due to indecisive trade talks with the US, global trade uncertainty caused by the Russia-Ukraine war, the Israel-Gaza war, and instability in South Asia also moved the rupee to the negative side. How does the RBI check the fall of Indian currency? The Reserve Bank of India (RBI) employs several strategies to manage the depreciation of the Indian rupee: These measures aim to ensure currency stability, support economic growth, and maintain investor confidence. Graphics: Kamlesh