During the analysis of the Indian rupee versus the US dollar, it remained within a narrow range for the entire month, primarily fluctuating between 87.6 and 88.8. According to Morningstar data, the currency started the month near 87.6 per dollar and gradually gained strength. However, it fell to around 88.8 by September 25. On September 26, the rate was 88.70, representing only slight variation for the month but staying near the weaker side of its recent range.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said, "Rupee traded up by 0.09 at 88.7, while the dollar index stayed flat. Despite the marginal gains, persistent FII selling has kept overall sentiment weak, while elevated global gold prices also weigh on the rupee as India remains a major net importer."

President Donald Trump’s recent tariff decision has unsettled markets. Starting October 1, the U.S. will implement a 100% tariff on branded and patented pharmaceutical imports unless companies set up manufacturing plants within the country.

India exported over $3.6 billion in drugs to the U.S. in 2024 and another $3.7 billion in the first half of 2025, putting it in a difficult position. "While the focus is mainly on multinational brands, there is concern that Indian complex generics or speciality medicines might also be affected. For the rupee—already near record lows—this adds another challenge, potentially deepening negative market sentiment," says Amit Pabari, MD and CEO of CR Forex Advisors.

If the tariff news wasn’t enough, a new batch of U.S. economic data has increased pressure. Initial Jobless claims for the week ending September 20 dropped to 2,18,000, surpassing the forecast of 2,35,000 and confirming the resilience of the American labour market. Additionally, second-quarter GDP growth was revised upward significantly to 3.8% year-over-year, the fastest growth in two years and well above expectations.

Pabari states that the U.S. economic data not only indicates underlying strength in the economy but also diminishes hopes for near-term policy easing by the Federal Reserve. Naturally, the dollar gained momentum, with the Dollar Index (DXY) rising close to 98.45. For the rupee, this meant increased vulnerability, as stronger U.S. data tend to pull capital away from emerging markets.

Still, some domestic factors offer a glimmer of support. In its latest bulletin, the Reserve Bank of India noted that the recent GST reforms announced by the government are expected to ease compliance, lower prices, and ultimately boost consumption-driven growth. Although these reforms have a gradual impact, they provide confidence that India’s medium-term fundamentals remain stable.

Currently, the tide favours the dollar over the rupee. Pabari says, "With global data and tariffs pushing the dollar higher, USD/INR faces resistance at 89–89.20, while support is near 88.40. The pharma tariff shock may keep sentiment unstable in the short term. However, if trade talks make any breakthrough, the rupee could rebound, recovering some of its recent losses."

"Focus remains on upcoming US data, including GDP, new and existing home sales, and the Core PCE price index, which could guide global flows. Rupee range is expected between 88.45-89," added Trivedi.