Rupee hits decade low valuation

FPJ News Service mumbai

The Indian rupee’s valuation versus other major currencies, calculated on a trade-weighted basis, has fallen to its ​lowest in more than a decade, hit by the Iran war-driven surge in crude oil prices and chunky foreign portfolio outflows, Reuters reported.

The South ​Asian currency’s 40-currency real effective exchange rate, which accounts for ⁠inflation differentials between different economies, fell to 92.72, the Reserve Bank of India’s latest bulletin released late on Thursday (April 23, 2026) showed.

The REER is now hovering well below its long-run average of 98.25, pointing to a deeply undervalued rupee against historical norms.

Relatively subdued inflation in India has weighed on the REER in recent months, adding to the ‌impact ⁠of the rupee’s roughly 4.5% year-to-date decline, analysts said. The ⁠currency hit a record low of 95.21 per dollar in late March.

Despite the extent of the rupee’s undervaluation, analysts see little near-term scope for a recovery.

While the rupee ​is highly undervalued on a REER basis relative to historical ranges, it is likely to remain under pressure in the near term due to dollar demand “from ramp-up in oil imports to secure supplies and by sizeable equity outflows amid heightened risk aversion,” analysts at BofA Global Research said in ​a note.

The March reading caps a roughly 15-point decline from late-2024 highs, marking one of the sharpest real ⁠depreciations episodes in years.

A weaker real-effective exchange rate helps make exports out of India more competitive, while increasing the cost of imports.