The Indian rupee has depreciated in line with other emerging economies, weighed down by the strength of US dollar, the RBI noted in its latest monthly bulletin. The US dollar index surged following the tariff announcements, triggering capital outflows from emerging markets and intensifying currency pressures. However, strong macroeconomic fundamentals, along with improvements in various measures of external sector vulnerability, have helped India tide over the ongoing wave of global uncertainty. A rising US dollar and FPI outflows from EMEs amidst growing global uncertainties exerted significant pressure on EME currencies during January 2025. The Indian rupee (INR) depreciated by 1.5 per cent (m-o-m) in January, in line with movements in most major currencies, RBI said. In an environment of heightened global market turbulence, the INR exhibited relatively low volatility, the central bank noted. The US dollar index (DXY) appreciated in the first half of January but gave up some of its gains subsequently. DXY remained volatile, responding to announcements of trade policy measures by the new US administration, the RBI bulletin stated. The MSCI currency index for EMEs mirrored movements in DXY with a depreciating bias as capital outflows, particularly in the equity segment, exerted downward pressure, it further noted.

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