Indian expats residing in the UAE are undoubtedly monitoring the recent pullback in the USD/INR currency pair, which has fallen from a peak of 88.87 to 87.80 as of now. This marks the rupee’s longest stretch of gains since June and has further room to run after the Reserve Bank of India (RBI) signaled a willingness to intervene in the FX markets to defend the currency. The currency pair has tried to breach the 88.80 level several times in recent weeks, but it has been in vain. Moreover, India’s real-effective exchange rate (REER) – a metric of how the degree of undervaluation or overvaluation in the rupee relative to the inflation differentials among India’s prominent trading partners – has plunged lately.
Earlier this year, when most Asian currencies were rallying, the rupee’s 3% slump stuck out like a sore thumb. It reflected India’s susceptibility to trade tariffs and other U.S. policies, such as higher H1B visa thresholds, accompanied by foreign investors pulling out of local equities at a swift pace. As a result, the RBI added $15 billion worth of net short USD to its reserves this month. Additionally, the central bank supplied 1.62 trillion rupees through two rounds of variable rate repo actions, totaling $18.4 billion. The RBI is using USD/INR FX swaps to infuse rupee liquidity in the system. Moreover, the increased likelihood of a U.S.-India trade deal in November is also lending support to the rupee as it could strengthen investor confidence and attract foreign inflows to India. However, the U.S. takes about 18% of India’s exports, double the 9% for the UAE, which comes in second place. Therefore, policy headlines from Washington could influence the currency’s immediate trajectory.
Another factor supporting the rupee includes its relatively elevated carry trade potential. In other words, India’s RBI repo rate is higher in both nominal and real terms at 5.50% as of October 2025. Even if a 25-basis-point rate cut materializes in Q4 2025, India’s policy rate would remain at the top end relative to Asian peers.
Technically, a trend-based Fibonacci extension connecting 19th August’s low of 86.92 with 25th September’s peak of 88.87 and extending it down to the recent swing low of 87.62 on 16th October indicates the presence of strong resistance at 88.85 and 89.60. Considering these factors, a further decline in USD/INR appears possible. So, expats wanting to remit money to India can consider doing so now before the currency pair weakens further.
