The Indian rupee (INR) depreciated against the US dollar in December, pressured by foreign portfolio outflows and uncertainty surrounding the India-US trade deal, RBI noted in its January bulletin. The volatility of the INR, as measured by the coefficient of variation, remained relatively lower than that of most major currencies. In January so far (up to 19th), the INR depreciated by 1.2 per cent over its end-December level. In real effective terms, the Indian rupee depreciated in December due to depreciation of INR in nominal effective terms and relatively lower inflation in India vis-à-vis its major trading partners.

Net FPI registered outflows from both the equity and debt segments in December, amidst uncertainty surrounding the stalled India-US trade deal and the depreciation of the rupee but the country’s external sector remains resilient, as evidenced by the improved international investment position as at end-September 2025, the central bank noted. Comfortable foreign exchange reserves and a sustainable current account deficit continue to underpin India’s external sector stability, it said.