The rupee: what moves it
How to read USD/INR, the forces behind it, and who is affected when it moves
Reference rate as on 31 August 2026; effective exchange rate indices for August 2026
Verified 12 October 2026
For training and education only. Not investment advice.
Trainer notes
Ask the room what 'the rupee fell to 95' means and who is affected by it. Set one ground rule at the start: this session explains what moves the rupee. It does not say where the rupee is going.
An exchange rate is a price: the number of rupees it takes to buy one unit of another currency.
Like any price, it moves with demand and supply. This deck explains what drives both. It does not forecast the rupee.
Trainer notes
Whoever needs dollars, such as an importer or a family paying a foreign university, sells rupees to buy them. Whoever brings dollars in, such as an exporter or a foreign investor, sells them for rupees. The rate moves until the two sides match.
Reading USD/INR
- 95.45
The quote
USD/INR 95.4509 means one US dollar cost ₹95.4509. That was the reference rate at 1 pm on 31 August 2026.
- Up
A higher number
A dollar costs more rupees. The rupee has weakened against the dollar. The formal word is depreciated.
- Down
A lower number
A dollar costs fewer rupees. The rupee has strengthened against the dollar. The formal word is appreciated.
Take-away: Each currency has its own rate: ₹110.61 for one euro and ₹129.29 for one pound on the same day.
Source: FBIL (Financial Benchmarks India), reference rates as at 1.00 pm on 31 August 2026.
Trainer notes
FBIL is Financial Benchmarks India, which publishes the daily reference rate that RBI shows on its website. The rate a customer gets from a bank or card differs from the reference rate because of the bank's margin and charges. On the same day 100 Japanese yen cost ₹59.72.
What a move in the rate does
THE SET-UP (ASSUMED)
Assume the dollar moves from ₹90 to ₹96.
An importer has a bill of US$ 10,000 to pay.
An exporter is due to receive US$ 10,000.
- The importer paid 10,000 × 90 = ₹9,00,000 before. Now it pays 10,000 × 96 = ₹9,60,000, which is ₹60,000 more.
- The exporter received ₹9,00,000 before. Now it receives ₹9,60,000, which is ₹60,000 more.
- The dollar costs 96 ÷ 90 − 1 = 6.67% more in rupees.
- One rupee bought 1 ÷ 90 = US$ 0.011111. Now it buys 1 ÷ 96 = US$ 0.010417, which is 6.25% less.
Result: One move, two ways to say it: the dollar is up 6.67%, and the rupee is down 6.25%.
Illustration with assumed figures. Not a forecast.
Trainer notes
The two percentages differ because each is measured from a different starting point. News reports usually quote the rupee's fall, 6.25% here. The rates ₹90 and ₹96 are assumed round numbers, not actual rates on any date.
What moves it: flows of money
Current account
Importers buy dollars. Exporters and remittances bring dollars in. A current account deficit means net demand for dollars. India's was 0.5% of GDP in April-June 2026.
Capital flows
Foreign investors bring dollars in when they buy Indian assets and take dollars out when they sell. Portfolio investors took out a net US$ 10.3 billion from April to 5 October 2026.
The dollar itself
USD/INR has two sides. When the dollar rises against most currencies, the rupee usually falls against it too, even if nothing has changed in India.
Sources: RBI balance of payments press release, 1 Sep 2026 (April-June 2026); RBI Governor's Statement, 7 Oct 2026 (portfolio flows).
Trainer notes
Capital flows can be far larger and faster than trade flows, so on a given day they often matter more. In his 7 October 2026 statement the Governor listed 'an appreciating dollar' among the forces keeping global markets nervous. See the deck 'Balance of payments and CAD' for the full account.
What moves it: gaps and RBI
Interest-rate gap
Money tends to move towards higher interest rates, after allowing for risk. RBI's repo rate is 5.50%. The US Federal Reserve's target range is 3.75% to 4.00%.
Inflation gap
If prices rise faster in India than abroad for many years, the rupee tends to lose value over that time. India's consumer price inflation was 4.82% in August 2026.
RBI intervention
RBI can sell dollars from its reserves or buy dollars. Its stated aim is orderly adjustment of the exchange rate and curbing excessive volatility.
Sources: RBI Monetary Policy and Governor's Statements, 7 Oct 2026; US Federal Reserve open market operations table; MoSPI CPI release, 14 Sep 2026.
Trainer notes
The interest-rate gap matters for bond investors and for companies choosing where to borrow. A higher rate does not by itself pull money in: investors also weigh the chance that the currency falls. The Governor's words on 7 October 2026: 'We remain committed to ensuring orderly adjustments to the exchange rate that are in sync with the underlying macroeconomic fundamentals and curbing excessive volatility.'
Nominal and real effective rates
| NEER | REER | |
|---|---|---|
| 2024-25 | 91.03 | 105.41 |
| 2025-26 | 84.73 | 97.44 |
| Aug 2025 | 85.41 | 98.75 |
| Jul 2026 | 77.97 | 91.78 |
| Aug 2026 | 78.04 | 92.00 |
Read the chart
- NEER: the rupee's average rate against 40 currencies, weighted by trade.
- REER: the NEER adjusted for the inflation gap between India and those countries.
- A fall in either index means the rupee weakened.
- August 2025 to August 2026: NEER 85.41 to 78.04, down 8.6%. REER 98.75 to 92.00, down 6.8%.
Source: RBI Bulletin, Current Statistics, Table 37 (40-currency basket, trade-weighted), published 25 Sep 2026. Data for 2025-26 onwards are provisional.
Trainer notes
Exact values, in the order of the chart: NEER 91.03, 84.73, 85.41, 77.97, 78.04; REER 105.41, 97.44, 98.75, 91.78, 92.00. The chart labels are rounded. NEER is the nominal effective exchange rate; REER is the real effective exchange rate. RBI's note to the table says an increase in the indices indicates appreciation of the rupee, and that the REER uses consumer price indices. USD/INR alone can mislead: the rupee can fall against the dollar and rise against other currencies on the same day. The percentage changes are our arithmetic on RBI's index values.
When the rupee weakens: who is affected
| Who | What changes | Effect |
|---|---|---|
| Importers | The same dollar bill takes more rupees. Imported fuel, parts and goods cost more in rupees. | Pay more |
| Exporters | The same dollar invoice converts into more rupees. Exporters who import their inputs gain less. | Receive more |
| People paying foreign fees | A fee or living cost fixed in a foreign currency takes more rupees. So does travel abroad. | Pay more |
| Holders of international funds | The fund's foreign assets convert into more rupees. The assets' own prices can still rise or fall. | Can lift NAV |
Take-away: Other things equal. Hedging and price changes can soften each effect. A stronger rupee reverses them.
Trainer notes
This slide describes mechanics. It is not a reason to buy or sell anything. An international fund's return in rupees has two parts: the change in the foreign market and the change in the exchange rate. Either part can be negative. Some funds hedge part of their currency exposure, which reduces the currency effect in both directions. Returns are not assured.
Purchasing power parity in one slide
THE IDEA (ASSUMED)
PPP says a basket of goods should cost the same in two countries once prices are converted at the exchange rate.
Assume the basket costs ₹2,400 in India and US$ 100 in the US.
- PPP rate = 2,400 ÷ 100 = ₹24 per dollar. At that rate the basket costs the same in both countries.
- Assume the market rate is ₹96. Then ₹2,400 converts to 2,400 ÷ 96 = US$ 25, a quarter of the US price.
- Next year prices rise 5% in India and 2% in the US: ₹2,520 and US$ 102. PPP rate = 2,520 ÷ 102 = ₹24.71.
- So PPP points to the higher-inflation currency losing value over time. Market rates can stay far from PPP for years.
Result: PPP is a long-run yardstick for comparing price levels. It does not predict next year's rate.
Illustration with assumed figures. Not a forecast.
Trainer notes
Market rates sit far from PPP rates mainly because much of what people buy, such as rent, haircuts and local services, is not traded across borders, so nothing forces those prices into line. PPP is used mostly to compare the size of economies and living standards. Every figure on this slide is assumed, including the ₹24 and the ₹96.
Where things stand
Policy rates are as of 7 Oct 2026 (Fed: 17 Sep). Other figures carry their dates.
- USD/INR REFERENCE RATE
- 95.4509FBIL reference rate, 1 pm, 31 August 2026.
- REER, 40 CURRENCIES
- 92.00Aug 2026; 2015-16 = 100. Aug 2025: 98.75.
- RBI REPO RATE
- 5.50%US Federal Reserve range: 3.75% to 4.00%.
- RESERVES
- $734.6bnForex reserves on 2 October 2026.
Take-away: We do not forecast the rupee. These are published figures, not a view on where it is heading.
Sources: FBIL reference rates, 31 Aug 2026; RBI Bulletin Table 37, 25 Sep 2026; RBI Monetary Policy Statement, 7 Oct 2026; US Federal Reserve; RBI Weekly Statistical Supplement, 9 Oct 2026.
Trainer notes
State the figures and stop. Do not add 'so the rupee will' to any of them. The Federal Reserve raised its target range by 0.25 percentage point at its meeting ending 16 September 2026, effective 17 September; RBI raised the repo rate by 0.25 percentage point on 7 October 2026. Reserves fell US$ 12,952 million in the week to 2 October 2026. Market figures are shown with a lag of at least 30 days, in line with SEBI's norms on price data used for education.
Four things people get wrong
Misconception'A dollar costs about ₹50.'
What is trueExamples written years ago often use ₹40 or ₹50. The reference rate on 31 August 2026 was ₹95.45. Check the date of any rate.
Misconception'A falling rupee means a failing economy.'
What is trueThe rate reflects demand and supply for dollars. It also moves when the dollar itself rises against most currencies.
Misconception'RBI fixes the rupee's value.'
What is trueDemand and supply move it; RBI can buy or sell dollars. Its aim: orderly adjustment, curbing excessive volatility.
Misconception'We can tell clients where it is heading.'
What is trueWe cannot, and we do not. Trustner does not forecast the rupee. Explain the drivers and the latest published figures, and stop there.
Trainer notes
Older training material also names the current account deficit as the main reason for a falling rupee. That deficit was 4.8% of GDP in 2012-13 and 0.6% in 2025-26, so the other drivers on slides 5 and 6 need equal attention today. Trustner and its people are mutual fund distributors; we explain, we do not predict.
Check yourself
Question 1: USD/INR moves from 90 to 99 (assumed). By what percentage has the dollar risen against the rupee, and what does a US$ 2,000 bill now cost in rupees?
Answer: 99 ÷ 90 − 1 = 10%. The bill costs 2,000 × 99 = ₹1,98,000, against 2,000 × 90 = ₹1,80,000 before.Question 2: What is the difference between the NEER and the REER?
Answer: NEER is the rupee's trade-weighted average rate against a basket of currencies (40 in RBI's main index). REER is the NEER adjusted for the difference between inflation in India and in those countries.Question 3: A client asks where the rupee will be a year from now. What do we say?
Answer: We do not forecast the rupee. We can explain what moves it and quote the latest published figures with their dates.
Sources and disclaimer
Sources for the figures in this explainer
- USD/INR 95.4509, euro 110.6079, pound 129.2873, 100 yen 59.7200: FBIL reference rates, 1.00 pm, 31 Aug 2026, FBIL reference rate archive.
- NEER and REER (40 currencies, trade-weighted, 2015-16 = 100): RBI Bulletin, Current Statistics, Table 37, 25 Sep 2026.
- Repo rate, exchange rate aim, portfolio flows: RBI Monetary Policy Statement and Governor's Statement, 7 Oct 2026.
- US federal funds target range 3.75% to 4.00% from 17 Sep 2026: Federal Reserve Board, open market operations table.
- Current account deficit: RBI balance of payments press releases, 1 Sep 2026, 8 Jun 2026 and 27 Jun 2013.
- Reserves on 2 Oct 2026: RBI Weekly Statistical Supplement, 9 Oct 2026. CPI for August 2026: MoSPI, 14 Sep 2026.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).