Falling Rupee should not be mistaken for inherently weak currency: SBI Research
Dec 04, 2025
New Delhi [India], December 4 : The slide in Indian Rupee driven by a complex mix of external shocks, foreign investor outflows and limited RBI intervention should not be mistaken for an inherently weak currency, said SBI Research Ecowrap report on Thursday.
The Indian rupee on Wednesday slipped past the psychologically significant 90-per-dollar level, marking one of its fastest declines in recent years.
The rupee has fallen from Rs 85 to Rs 90 per USD in under a year, far quicker than previous five-rupee intervals, which earlier took anywhere between 581 to 1,815 days. SBI in its report noted this as the second-quickest fall since the 2013 Taper Tantrum.
Since April 2, 2025, when the United States announced sweeping tariff hikes across economies, Indian rupee has deprecated by nearly 5.5% against USD, most amongst the major economies, notwithstanding sporadic phases of appreciation owing to optimism over positive, mutually beneficial conclusion.
"However, while Rupee is the most depreciated currency amidst select major economies, it is not the most volatile," SBI report said.
The high slab of 50% tariff imposed on India, substantially higher than peers like China (30%), Vietnam (20%), Indonesia (19%), and Japan (15%), is one of the major factors behind current phase.
Yet, the rupee remains among the least volatile currencies, with a coefficient of variation of only 1.7% since April.
If we look at the Real Effective Exchange Rate (REER) data of 40-currency basket with base 2015-16, the index was above 100 until May 2025. But the onset of the trade war has pulled it below the 100 level, as rupee lost more ground compared with other EM currencies, the SBI report highlighted.
The lowest level in recent times was in April 2023, when the REER was recorded at 98.98.
Since April 2023, Rupee has declined nearly 10% and the REER reached the lowest level 97.40 in September 2025, which is 7-years low since November 2018, when it was at 99.60. Further, the latest RBI REER data as on October 2025 indicates Rupee is undervalued for 3rd straight month, which reflects softer currency and lower inflation.
Generally, India's REER remains in the range of 102-105, with an average of 103.47 during Dec'2018 to July'2025, the SBI report said.
REER is the weighted average of a country's currency in relation to an index or basket of other major currencies.
