The Indian rupee has experienced a long-term weakening trend over the last 15 years despite interventions by the Reserve Bank of India [1, 2].

This persistent depreciation persists even while India maintains strong economic growth. The currency's volatility reflects a struggle between domestic stability measures and external geopolitical shocks that threaten the nation's foreign-exchange market [1, 3].

Recent efforts by the Reserve Bank of India (RBI) provided brief relief to the currency. The RBI imposed a cap on short-selling limits to curb speculation [2, 4]. This measure sparked dollar sales and led to a 1.4% jump in the rupee at the Monday open on March 4, 2024 [5].

However, the relief was fleeting. Market analysts said that the rupee remains anchored to a weakening trajectory due to structural factors [1, 3]. These internal pressures are compounded by global uncertainty, specifically tensions between the U.S. and Iran [1, 3].

Oil-market shocks further exacerbate the pressure on the currency [1, 3]. Because India is a major oil importer, volatility in energy prices often translates directly into depreciation pressure for the rupee. While the RBI can implement temporary caps to stop rapid slides, these tools do not address the underlying causes of the currency's decline [2, 4].

Reports differ on the primary driver of the current weakness. Some sources said the war between the U.S. and Iran is creating immediate depreciation pressure [3]. Other analysts said the weakness is about more than the Iran war and reflects deeper structural issues [1].

“The Indian rupee has experienced a long-term weakening trend over the last 15 years”

The divergence between India's strong GDP growth and its weakening currency suggests that macroeconomic success is being offset by external vulnerabilities. By relying on short-term interventions like short-selling caps, the RBI can manage volatility, but it cannot reverse a trend driven by global oil dependency and geopolitical instability in the Middle East.