Rupee emerges as most-stable currency among advanced and developing economies amid tariff uncertainty, says Motilal Oswal

The Indian rupee (INR) depreciated only marginally by 1% against the US dollar in the six-month period, from December 2024 to July 2025, making it the smallest decline among all weakening currencies, a research report from Motilal Oswal noted today. This marginal decline stands in stark contrast to the significant swings and volatility observed in other markets. Despite rising global trade tensions, the small movement suggests stable exchange rate conditions, steady inflation expectations, and a well-managed external sector, according to Motilal Oswal report. 

On Monday, July 28, the Indian currency declined by 12 paise to Rs 86.81 against the USD. Talking about this, Amit Pabari, MD and CEO of Cr Forex, told Fortune India that owing to domestic and external headwinds, the rupee saw some pushback.

“The INR weakened further on Monday, as global dollar strength and sustained foreign equity outflows weighed heavily on sentiment. While the world cheered trade breakthroughs, the rupee had little to celebrate, pulled down by a mix of external and domestic headwinds,” said Amit Pabari, MD and CEO of Cr Forex.

The Motilal Oswal report claimed that from FY22 to FY25, the rupee’s depreciation has been limited and well-managed. It stayed within a narrow range of 0.5% to 2.7% year-on-year. This compares sharply with the heightened volatility seen during the Taper Tantrum in FY13 and FY14, when the rupee depreciated steeply by 13.3% and 11.7%, respectively.

"Amid global tariff uncertainty and renewed volatility in capital markets, the Indian Rupee (INR) emerged as the most stable currency among both advanced economies (AEs) and emerging and developing economies (E&DEs) during the period from Dec’24 to Jul’25," the report said.

The report stated that the stability can be attributed to several key factors. For instance, a narrower current account deficit, a growing surplus in services trade, record levels of foreign exchange reserves, and timely policy interventions by the Reserve Bank of India (RBI) in both spot and forward currency markets.

Among advanced economies, as per the report, several currencies experienced sharp appreciations against the US dollar. The Euro and the Taiwan Dollar appreciated by 10.4%, likely driven by portfolio inflows amid diverging monetary policies from the US Federal Reserve. The British Pound (up 6.6%), Singapore Dollar (up 5.2%), and Japanese Yen (up 4.6%) also recorded notable gains. These movements emphasise a strong response to shifts in global liquidity, investor risk appetite, and interest rate differentials. In contrast, the INR’s modest depreciation underscores the country’s stable macroeconomic environment and low levels of speculative pressure.

Among emerging and developing economies (E&DEs), as mentioned above, the INR’s modest depreciation of 1% stood out as a rare exception, as most peer currencies gained against the US dollar during the same period. For instance, the Russian Ruble (up 23.5%), Brazilian real (up 9.7%), and Mexican peso (up 7.7%) recorded strong appreciations, driven by factors such as commodity windfalls, attractive interest rate differentials, and targeted capital inflows. In Asia, regional currencies like the Malaysian ringgit (up 5%), Thai baht (up 4.8%), and Philippine peso (up 3.1%) appreciated, supported by stronger trade balances and closer alignment with the US interest rate cycle, the report stated.

The report also mentioned that only four out of the 20 currencies registered a depreciation: India (+1%), Indonesia (+1.4%), Turkey (+14.5%), and Hong Kong (+1%).

"Turkey’s steep decline was largely driven by domestic macroeconomic instability, while the depreciations in Indonesia and Hong Kong were relatively mild. India’s slight weakening, despite global market volatility and rising tariff tensions, highlights the resilience of its exchange rate, particularly notable as most other currencies posted appreciations during the same period," stated the report.