Rupee Exchange Rate Trends Analyzed

Exchange Rate Developments of the Indian Rupee:

1. Rupee Depreciation:

   • The Indian Rupee (INR) breached the 89 mark against the USD, closing at 89.46.
   • Between November 21-28, 2024, the rupee weakened against major currencies:
     • USD: 88.64 to 89.46
     • Euro: 102.32 to 103.63
     • GBP: 116.08 to 118.27
     • JPY: 0.5642 to 0.5720
   • Year-over-year depreciation (from November 2024):
     • USD: 84.49 to 89.46
     • Euro: 89.12 to 103.63
     • GBP: 106.97 to 118.27
     • JPY: 0.5574 to 0.5720

2. Effective Exchange Rates:

   • Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) are key indices for assessing rupee values against a basket of 40 currencies.
   • NEER below 100 indicates depreciation against trading partners since 2018-19; a value of 90 signifies a 10% fall since 2015-16.
   • As of October 2025:
     • NEER at 84.58, indicates a marked decline from 90.75 in January 2025.
     • REER at 97.47, dropped from an all-time high of 108.06 in November 2024, indicating an undervalued rupee affected by depreciation and low inflation.

3. Inflation Context:

   • As of October 2025, India's CPI inflation was at 0.25%, lower than rates in the US (3%), UK (3.6%), Euro Area (2.1%), and others. This relatively low inflation supports the rupee's undervaluation in REER terms.

4. IMF Classification:

   • IMF has reclassified India's exchange rate regime as a "crawl-like arrangement" due to recent frequent interventions by the Reserve Bank of India (RBI) in the foreign exchange market.
   • The regime is described as neither fully floating nor pegged, allowing gradual adjustments.

5. RBI Policy Direction:

   • Under Governor Sanjay Malhotra, the RBI has adopted a flexible exchange rate policy with occasional interventions.
   • The approach aims to enhance trade competitiveness while considering domestic inflation trends.

6. Future Expectations:

   • Both continued nominal depreciation and low CPI inflation might lead to further declines in the rupee’s REER, influencing trade and economic strategies.

This summary encapsulates the fundamental economic shifts concerning the Indian rupee and its implications on trade and policy, emphasizing the context of prevailing currency valuations, inflation statistics, and international oversight from bodies like the IMF.