India’s Rupee Likely to Remain Asia’s Worst Performer as U.S. Tariffs Set In

Trade Tensions Deepen Currency Weakness

The Indian rupee is expected to continue its decline and remain one of Asia’s worst‑performing currencies over the coming months, as recent U.S. trade tariffs and weak foreign investment flow combine to weaken investor sentiment and apply persistent pressure on the currency.

July Records Steepest Weekly Decline Since 2022

The rupee fell 1.2% last week to 87.5275 per dollar on Friday, marking its biggest weekly drop since December 2022. It briefly breached near‑record lows per U.S. dollar. The decline comes in the wake of President Donald Trump’s announcement of 25% tariffs on Indian exports, alongside undefined additional penalties.

Persistent equity outflows added to the pressure. According to market data, foreign investors sold over $11 billion worth of Indian equities in July, as economic growth slows. Analysts at Deutsche Bank and Barclays expect the rupee to slide to new record lows by year‑end amid muted capital inflows, while peers like the Chinese yuan and Indonesian rupiah may outperform.

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Analysts foresee a potential decline of 30–40 basis points from India’s GDP growth in 2025–26 due to trade-related headwinds. The Reserve Bank of India (RBI) is expected to adopt a measured stance, potentially intervening to manage volatility while also watching trade talks and inflation trends. 

Last week, the INR fell by 1.2% — its worst weekly performance since December 2022 — despite RBI intervention to temper intraday losses. Several traders expect the currency to trade around ₹87.00 to ₹87.80 this week, closely watching an upcoming $5 billion dollar‑rupee swap maturity and the central bank’s monetary policy meeting on August 6. 

Economists like Adrian Mowat noted that while India’s macroeconomic structure gives some resilience, sustained rupee weakness could exacerbate imported inflation pressures. They highlighted the importance of managed monetary response and trade negotiations to stabilise the currency outlook.

Conclusion

Due to a mix of trade uncertainties, large outflows of foreign portfolios, and U.S. import taxes, the Indian rupee is probably going to continue to face pressure into the second half of 2025. The currency's outlook is seriously threatened by larger macro issues and postponed trade discussions, even though near-record foreign exchange reserves and intermittent RBI intervention may provide short-term assistance.