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

The Indian rupee may have tumbled to the 90-mark against the US dollar, but it's managing to hold its ground more firmly than many of its emerging market counterparts, the government sources said on Friday.

They said that 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 the Korean won this year.

Citing the Reserve Bank of India's latest assessment, officials said the slide in October was due to a stronger dollar after the US Federal Reserve announced its decision to lower the Federal Funds Rate.

According to the RBI's November bulletin, "the depreciation of the rupee in October was due to a stronger dollar following the US Fed's policy announcement to lower the Federal funds rate."

Sources said the rupee's relative stability is supported by India's broader fundamentals - "stable inflation, a resilient growth outlook for the Indian economy, a narrower current account deficit, steady services exports, robust private remittances, and robust foreign exchange reserves." 

They added that the rupee's movement from April to November 2025 has been in line with that of other currencies such as the Japanese Yen and the Korean Won. For the period from April to November 2025, the Indian rupee's depreciation stands at -4.1%, performing better than the Euro (-6.7%), Japanese yen (-3.5%), and Australian dollar (-3.4%).

Officials reiterated the central bank's stance that the value of the INR is market-determined, with no target or specific level or band. They said the exchange rate continues to reflect a mix of global and domestic factors - the Dollar Index, capital flow trends, interest rate cycles, crude prices, and the current account position.

According to government sources, the RBI monitors key developments across the globe that may have an impact on the USD-INR exchange rate. This includes monetary policy actions, major data releases, OPEC+ decisions, geopolitical events, and movements in G-10 and emerging market currencies. The central bank’s interventions, they said, are aimed only at ensuring orderly market functioning and "to curb undue volatility in the INR."

Steps taken by the RBI

Sources highlighted measures taken in recent years to diversify foreign exchange inflows. These include:

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

Transfer of funds for all bona fide transactions between repatriable rupee accounts was permitted in January 2025.

On December 6, 2024, the RBI raised the ceiling rate for FCNR(B) deposits, allowing banks to offer higher interest rates on deposits mobilised till March 31, 2025.

An operational framework released in November 2024 allowed FPIs breaching the 10% limit to divest or reclassify their holdings as FDI.

In May 2024, authorised dealers were permitted to allow non-residents to open and maintain interest-bearing rupee or foreign currency accounts “for the purpose of posting and collecting margin in India” for permitted derivative contracts.

Push for rupee-based trade

The October 2025 MPC meeting introduced further measures to expand the international use of the rupee. Authorised dealer banks can now lend in rupee to non-residents in Bhutan, Nepal, and Sri Lanka for trade transactions. 

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

The permitted uses of Special Rupee Vostro Account balances will now include investment in government securities, corporate bonds, and commercial papers - a move officials say is designed to deepen rupee-based settlement systems.

Sources said these steps are aimed at improving access to rupee-denominated transactions while strengthening resilience against global spillovers, even as the currency remains under pressure in the near term.

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