India’s rupee crashed to a record 0.011268 against the dollar on Friday, even as the country’s equity benchmarks and bond markets posted broad gains.
The historic plunge comes under President Donald Trump’s ongoing tariff policy, which has weighed heavily on India’s trade prospects. Officials in New Delhi are now rolling out long-term plans to cut dependence on the dollar as they try to shore up sentiment for the rupee.
The fall of the rupee has made it the worst-performing currency in Asia this year.It has dropped 3.6% against the greenback despite a softer dollar environment.
Analysts warn that this slide poses inflation risks for India, which imports a large portion of its fuel, and also makes global investors cautious about deploying funds into Indian markets. Officials are now trying to globalize the rupee in a way similar to China’s strategy with the yuan, but experts say the process is full of obstacles.
RBI expands tools to push rupee in cross-border trades
The Reserve Bank of India (RBI) this week introduced new measures to push global acceptance of the rupee.It announced new reference rates for key partners like the United Arab Emirates and Indonesia.
By doing so, banks can directly price trades in rupees and partner currencies instead of routing them through the dollar. R. Gurumurthy, a retired regional director at the RBI, said, “Transactions are typically channeled via the dollar, adding a costly layer.”
The RBI also broadened the types of assets that holders of some overseas accounts can purchase and allowed banks to lend the local currency in three neighboring countries.
Abhishek Upadhyay, an economist at ICICI Securities Primary Dealership Ltd, said the timing of the measures shows the central bank’s effort to strengthen sentiment for the rupee and slow the pace of its depreciation.
Experts caution that pushing up the usage of the rupee globally will demand more than publishing a reference rate.Gaura Sen Gupta, chief economist at IDFC First Bank, said that “removal of restrictions on the convertibility of the currency” would eventually be required to reach true internationalization.
Gurumurthy added that central banks might also need to coordinate interventions to prevent volatility in new currency pairs. “Publishing a reference rate does not by itself create liquidity and banks will only trade actively if there is sufficient demand, hedging tools, and confidence in market stability,” he said.
Dollar stays dominant as Indian markets rally under lending reforms
Breaking the dollar’s dominance will not be easy. Data from the Bank for International Settlements showed the U.S. currency was on one side of 89% of all foreign-exchange trades in 2025, up from 88% in 2022.
While the rupee struggled, India’s stock market index the Nifty 50 rose 0.23% to 24,894.25, and the BSE Sensex added 0.28% to 81,207.17.Both indexes rose about 1% over the week, driven by banks.
State-owned lenders surged 4.4%, private banks climbed 2.5%, and high-weight banks increased 2.2% after the RBI eased rules for lending to capital markets and large companies on Wednesday.
The RBI kept rates steady as expected but announced plans to raise limits on lending against shares and to cut risk weights for non-bank lenders funding infrastructure projects.
“The status quo on rates is a relief for banks as a rate cut would have led to contraction of net interest margins, while the relaxation of restrictions on bank loans will aid credit growth,” said Prakhar Sharma and Vinayak Agrawal, equity analysts at Jefferies.
Metals also posted gains. Prices rose 1.8% on the day to a record high, pushing weekly gains to 3.9% on a weaker dollar, supply disruptions, and firmer expectations for an October U.S. rate cut. The broader small-cap and mid-cap indexes gained 1.8% and 2% this week, showing how Indian assets remained strong even as the rupee hit an all-time low.
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