When the Rupee Wilted: What’s Roiling INREUR in the Summer of 2025?

Sometimes, the charts whisper louder than the headlines: in just three months, the INREUR currency pair has shed 9.1% of its value—a slide that’s left traders and corporates scrambling for explanations. Is this the tremor before the quake, or the aftershock of a world gone macro-mad?

The Rupee’s Dilemma: Tariffs, Tensions, and Trade-offs

In August 2025, India was hit with a double-barreled tariff salvo from Washington: US President Donald Trump’s administration slapped a 25% tariff on Indian goods at the start of the month, only to double down a week later, ratcheting the duty to 50%. Nearly ₹87 billion of Indian exports—about 2.5% of GDP—are now taxed at the border, with sectors like textiles, gems, chemicals, and auto components feeling the heat.

The direct economic blow? GDP growth projections were slashed by up to 0.5 percentage points, while engineering exports are forecast to tumble by 4–5%. The market’s first response: the rupee dropped offshore, triggering a fresh wave of import-inflation worries. For a currency already facing global headwinds, the summer was just getting started.

Oil, Gold, and the Price of Volatility

India’s current account is notoriously sensitive to energy prices. When Brent crude spiked 7–11% in June—peaking at $79.5 per barrel after fresh Israeli-Iranian tensions—the math was brutal: every $10 uptick in oil means an extra $13–14 billion on India’s import bill. Gold imports, too, doubled to $3.11 billion, further widening the merchandise deficit.

The result? India’s current account deficit edged up to 1.2% of GDP in Q2 2024-25, with the rupee losing nearly 6% against the US dollar over the past year. Even as services exports and remittances posted robust gains, the gravitational pull of oil and gold kept the rupee on the back foot—especially against a euro buoyed by Europe’s shrinking energy imports and record trade surpluses (€16.2 billion in May).

Central Bank Chess: RBI’s Calculated Pause

The Reserve Bank of India has been in a delicate dance. Earlier in 2025, it slashed the repo rate by 75 basis points in quick succession, from 6.50% to 5.50%, in an effort to cushion growth amid rising global uncertainty. But at its August meeting, the Monetary Policy Committee put its foot on the brake, keeping rates unchanged and signaling a “neutral” stance.

On paper, this was prudent. In practice, with US rates steady and the ECB gradually easing, the narrowing interest-rate differentials sapped the rupee’s carry appeal. Portfolio flows, especially fickle foreign institutional inflows, became more volatile—adding to the rupee’s woes against the euro, which found tailwinds in Europe’s moderating inflation (1.9% forecast for 2025) and sturdy labor markets.

Geopolitics: The Shadow Over Capital Flows

Global money is skittish in 2025. The Russia–Ukraine war’s endless permutations, China’s multipolar maneuvering, and relentless US tariff brinkmanship have all stoked capital-flow volatility. India, as an emerging market, is especially exposed: FDI inflows have slumped to $10.58 billion (down 62% year-on-year), even as portfolio inflows briefly surged before reversing on currency jitters. The RBI has intervened repeatedly—using both spot and forward markets—to dampen rupee swings, but with only partial success against the euro’s recent strength.

Europe’s Quiet Resilience: The Other Side of the Coin

While India wrestled with oil shocks and trade crossfire, the eurozone has quietly returned to form. A record trade surplus, cooling inflation, and a wave of clean-energy investment ($494 billion in 2025 alone) have underpinned the euro. Russia’s grip on European gas has loosened—down from 45% to 18% of imports—reducing the eurozone’s energy vulnerability. The ECB’s cautious rate cuts have also helped cap volatility, making the euro a relative safe haven in a world of emerging-market turbulence.

INREUR’s 9.1% Slide: No Accident, All Macro

So, why did INREUR tumble 9.1% in three months? The answer is the sum of its parts: a cocktail of US tariffs, surging oil and gold imports, a central bank in reactive mode, and a Europe that—at least for now—looks steadier than its largest trading partner to the east. The rupee’s slide is not a story of local missteps, but of global tectonics. When capital sprints for the exits and the world’s crises pile up, it’s the emerging-market currencies like INR that feel the chill first.

For now, the INREUR chart is a map of the world’s anxieties, not just India’s. And as the macro currents shift, so too will the story this cross-rate tells—charting the intersection of politics, policy, and the price of risk in a world that keeps rewriting the rules.