Why the Rupee Continues to Fall Against the US Dollar, Why Is RBI Not Intervening?

The Indian rupee is once again facing downward pressure, despite a broader weakening of the US dollar globally. A primary factor is the steady demand for dollars by foreign banks, likely due to corporate outflows and hedging by importers. Simultaneously, rising US bond yields are making dollar-denominated assets more appealing, adding strain to emerging market currencies like the rupee. Even though India’s macroeconomic fundamentals — such as inflation and GDP growth — remain solid, global sentiment is becoming more risk-averse. Many suggest the RBI may be allowing the rupee to adjust naturally rather than depleting forex reserves to defend a specific rate. Declining forward premiums also signal waning confidence in the rupee’s future stability. Geopolitical tensions, upcoming U.S. Fed announcements, and G7 economic strategies are further clouding the outlook. With the USD/INR nearing 86, the question now is whether this is a temporary fluctuation or the beginning of a new normal for the rupee.