The fall of the rupee to 87.78 against the US dollar amid the announcement of new US tariffs marks a pivotal moment in India’s economic landscape. This downturn in the Rupee vs Dollar today reflects wider repercussions for India’s trade, corporate sector, and common citizens, making it crucial to understand the underlying forces and potential fallout.
Rupee vs Dollar Today: What Triggered the Slide?
The Indian rupee depreciated to 87.78 against the US dollar in early trade on August 26, 2025, a drop of 22 paise from the previous close. The main trigger for this sudden move was the US government’s announcement of an additional 25% tariff on Indian goods, set to take effect from August 27. This move is part of escalating trade tensions, with the US citing concerns over certain Indian policies and trade practices. The market’s immediate reaction was increasing dollar demand from importers expecting costlier imports, and outflows as investors braced for economic impact.ptinews+2
Key Factors Behind the Slide
Several combined elements led to the rupee’s weakening:
- US Tariffs: The new 25% tariff on Indian exports to the US comes on top of previous duties, bringing total tariffs up to 50% for certain products.cleartax
- Foreign Portfolio Outflows: Persistent selling by foreign investors in Indian equities added to downward pressure on the rupee.economictimes
- Strong Dollar & Global Headwinds: A firm US dollar index and weak global market sentiment have compounded the rupee’s woes.tradingeconomics+1
- Central Bank Actions: The Reserve Bank of India (RBI) has tried to cushion the fall, but market dynamics and policy priorities meant the RBI allowed some flexibility, especially to support export competitiveness.economictimes+1
A Snapshot: Rupee vs Other Currencies
Below is a comparative table illustrating the Indian rupee’s position against several global currencies as of August 26, 2025, giving context to the rupee vs dollar today narrative:tradingeconomics
| Currency Pair | Value (INR per Unit) | Change (Year) |
|---|---|---|
| USD/INR | 87.78 | +4.5% tradingeconomics |
| EUR/INR | 101.99 | +8.9% tradingeconomics |
| GBP/INR | 118.03 | +6.7% tradingeconomics |
| AUD/INR | 56.78 | -0.1% tradingeconomics |
US Tariffs: What Do They Mean for Indian Exports?
The latest US trade action includes 50% tariffs (after a new 25% hike) on $60.2 billion worth of Indian goods — textiles, gems, shrimp, carpets, and furniture among the most affected. Alternative suppliers like China, Vietnam, and Mexico are expected to take advantage, threatening a dramatic reduction in India’s export share.timesofindia.indiatimes
- Projections show India’s exports to the US could fall from $86.5 billion in FY2025 to $49.6 billion in FY2026 — a 43% drop in sectors impacted by tariffs.timesofindia.indiatimes
- Labour-intensive industries expect the harshest blow, with estimates of a 70% reduction in export volumes for some categories.timesofindia.indiatimes
- This could lead to significant job losses and disrupt India’s role in global supply chains.timesofindia.indiatimes
Table: Impacted Sectors and Projected Export Change
| Sector | Export Value FY2025 ($B) | Projected FY2026 ($B) | Export Volume Change |
|---|---|---|---|
| Textiles/Apparel | 16 | 5 | -70% timesofindia.indiatimes |
| Gems & Jewellery | 15 | 7 | -53% timesofindia.indiatimes |
| Carpets/Furniture | 10 | 2 | -80% timesofindia.indiatimes |
How the Rupee’s Fall Impacts the Indian Economy
Imported Inflation
As the rupee falls against the dollar today, imported goods — especially crude oil, electronics, and industrial inputs — become costlier. This imported inflation can ripple through to consumer prices, reducing discretionary income and eroding purchasing power.cleartax+1
Trade Balance and Current Account
The higher cost of imports worsens the trade deficit, putting further pressure on the rupee. Conversely, a weaker currency can make exports more competitive if tariffs don’t negate this advantage.cleartax+1
Borrowing Costs for Indian Firms
Companies with significant foreign currency debt must now pay more in rupee terms to service those liabilities. This can squeeze margins for sectors like aviation, oil & gas, and infrastructure.cleartax
Impact on Stock Market and Investments
Market volatility has increased, with FIIs (Foreign Institutional Investors) pulling billions from Indian equities amid uncertainty. However, certain sectors like IT and FMCG, with less exposure to US exports, are more resilient.economictimes+1
Historical Perspective: Rupee vs Dollar Today vs Past Trends
The weakness in the rupee is not isolated — the USD/INR rate rose by 1.1% in the past month and has depreciated by over 4.5% year-on-year.wise+1
Table: Historical Rupee vs Dollar Exchange Rate
| Date | USD/INR Rate | Monthly % Change | Yearly % Change |
|---|---|---|---|
| 26 Aug 2025 | 87.78 | +1.1% tradingeconomics | +4.5% tradingeconomics |
| 26 Jul 2025 | 86.82 | – | – |
| 26 Aug 2024 | 84.02 | – | – |
Comparative Global Impact
While other emerging market currencies have also depreciated against the dollar due to global risk aversion, the magnitude of India’s fall is larger, mainly due to trade policy headwinds. India’s situation is worsened by targeted US tariffs, while nations like Vietnam and China gain from trade diversion.cleartax+1
RBI’s Role and Possible Policy Response
The Reserve Bank of India has provided intermittent support to the rupee, especially at crucial resistance points like 87.80-87.95, but is allowing some weakness to help make exports more competitive. The RBI must balance between inflation control and export competitiveness.tradingeconomics+1
Possible actions include:
- Intervention in Forex Markets: Selling dollars from reserves to stabilize the rupee.
- Interest Rate Adjustments: To attract capital flows if inflation remains in check.
- Communication: Assuring markets and investors about the policy path and inflation targets.
Outlook: Where Is the Rupee Headed?
Market consensus and economic models estimate the rupee may trade at 87.84 by the end of the quarter, and could reach 88.55 in the next 12 months, barring a significant turnaround in global or trade conditions.tradingeconomics
What Should Businesses and Investors Do?
- Hedge Currency Risks: Importers and debt-heavy companies must actively hedge their dollar exposure.
- Diversify Export Markets: Firms reliant on US markets need to diversify clients and product ranges to reduce exposure.
- Monitor RBI Guidance: Stay tuned to policy signals which may offer clues for currency and interest rate trajectories.
Rupee vs Dollar Today: Key Takeaways
- The rupee’s depreciation to 87.78 vs the dollar reflects the combined impact of US tariffs, capital outflows, and global uncertainty.
- India faces a potential 43% fall in US-bound exports for affected sectors, risking jobs and growth.
- Imported inflation is a significant risk, particularly for the cost of fuel, electronics, and manufacturing inputs.
- The RBI is likely to intervene strategically, balancing the goal of supporting exports against the need to keep inflation in check.
- Businesses and consumers must brace for persistent volatility and higher costs in the short-to-medium term.
Frequently Asked Questions (FAQs)
1. Why did the rupee fall to 87.78 against the US dollar today?
The rupee dropped due to heightened demand for dollars amidst fresh US tariffs on Indian goods, persistent foreign investment outflows, and global market volatility.cnbctv18+2
2. Which Indian sectors are most impacted by the new US tariffs?
Labour-intensive sectors such as textiles, gems & jewellery, carpets, and furniture are being hit hardest, facing a combined 50% tariff on exports to the US.timesofindia.indiatimes+1
3. How does the rupee’s fall affect ordinary Indians?
A weaker rupee raises the price of imported goods such as crude oil, electronics, and grains, potentially driving up inflation and impacting the cost of living.tradingeconomics+1
4. What is the RBI doing to address the rupee’s weakness?
The RBI is intervening selectively in the forex market to stabilize the rupee and prevent excessive volatility, while monitoring inflation and trade competitiveness.economictimes+1
5. What is the outlook for the rupee vs dollar today in the near future?
Analysts expect continued pressure on the rupee, with a possible range of 87.84–88.55 vs the US dollar over the coming months if global and policy headwinds persist.tradingeconomics
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