India-US trade deal details to determine the impact on Rupee, says RBI chief Malhotra

India-US trade deal will have an impact on the Indian Rupee, however, the extent would depend on the details of the pact, Reserve Bank of India Governor Sanjay Malhotra said on Friday.

“Now the trade deal will be signed. So what will be the impact of this trade deal? It will depend on the details of the trade deal,” Malhotra said, noting that the Indian currency appreciated by about 1.5 Rupees per dollar after the announcement.

Rupee has depreciated by approximately 5.4 per cent against the US dollar between April 1, 2025 and January 15, 2026.

Also read: India-US trade deal to boost merchandise exports, FTAs may help sustain growth momentum, says RBI Governor Malhotra

His remarks come at a time when the Rupee is trading in a narrow range close to its all-time high of Rs 91.97 against the US dollar, largely supported by foreign banks’ dollar sales and ⁠traders cutting intraday short bets. As corporate India’s dollar demands continue to be high, the Indian currency closed at a 90.3550 Rupees per dollar, ‌up 0.1% on Thursday.

Prime Minister Narendra Modi and US President Donald Trump independently announced the conclusion of a trade deal between the two economies late on Monday, which would reduce tariffs on Indian exports to 18%, from the earlier 50% tariff (including 25% punitive tariff imposed by Trump).
Given the conclusion of the trade deal, the central bank has already added 20 basis points because of various reasons, including the US trade deal. RBI has maintained that it does not target any level or ‌band on ‍the currency and only steps in to curb excessive volatility.

Rupee ‘punching below its weight’

The rupee’s valuation does not accurately reflect India’s stellar economic fundamentals, the latest Economic Survey said. “In other words, the rupee, therefore, is punching below its weight. Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now.”
Rupee is down about 2% so far this year and nearly 5% since the U.S. imposed steep tariffs on Indian merchandise exports in August.

‘Done everything within the country’

Finance Minister Nirmala Sitharaman, during her Budget 2026 presentation, noted that the government has done everything within the country to make sure the fundamentals are fine, but added that “the uncertainty globally is affecting” the rupee’s movement against the US dollar.

She suggested that the rupee’s performance is being shaped more by external forces than by weaknesses at home.