The Indian rupee’s steady weakening is pushing the UAE dirham closer to the psychologically important Rs25 mark, raising expectations of stronger remittance inflows from the Gulf and giving expatriate workers a timely exchange-rate boost.
With the Reserve Bank of India (RBI) signalling it will not defend any specific currency level and markets forecasting further rupee depreciation, traders increasingly see downside pressure as difficult to avoid in the near term.
At current levels, the shift is already working in favour of overseas earners. With the rupee trading around 90.87 to the dollar, the UAE dirham — pegged at roughly 3.6725 to the greenback — is hovering between Rs24.70 and Rs24.75. If the rupee weakens to Rs92 per dollar, as some forecasts suggest, the dirham would cross Rs25 for the first time, delivering a direct boost to the rupee value of monthly transfers sent home by UAE and GCC-based workers.
RBI Governor Sanjay Malhotra said the central bank does not target any particular rupee level, including psychologically significant thresholds such as 90 or 91 to the dollar, and intervenes only to curb excessive volatility. Speaking to NDTV Profit, Malhotra said India’s exchange rate policy remains market-driven, with the RBI focused on financial stability and orderly currency movement rather than defending fixed levels.
His remarks came as the rupee closed at 90.8650 per dollar, down 0.6 per cent on the day — its sharpest fall since mid-November — and edging closer to the record low of 91.0750 reached in December. Traders said elevated dollar demand from importers and the unwinding of positions in the offshore non-deliverable forwards market accelerated the slide, while intermittent dollar sales by state-run banks, likely on behalf of the RBI, helped cap losses.
Market participants interpret the RBI’s stance as a signal that policymakers are prepared to tolerate a weaker rupee as long as volatility remains contained. Analysts say the currency is under pressure from a combination of global dollar strength, sustained foreign investor outflows and widening external imbalances. Forecasts now suggest the rupee could test Rs92 against the dollar by March 2026, although intermittent rebounds later in the year remain possible if global trade conditions improve.
For expats in the Gulf, the implications are clear. With the dirham, Saudi riyal, Qatari riyal and other GCC currencies linked to the dollar, every incremental rupee decline amplifies remittance value. A move from Rs24.7 to Rs25 per dirham would translate into thousands of additional rupees annually for many households, helping families manage rising education, housing and healthcare costs in India.
Malhotra said India’s macroeconomic fundamentals remain strong, citing high growth, relatively low inflation, foreign exchange reserves of about $690 billion and a manageable current account deficit. “On the whole, on the external front, we are very comfortable,” he said, while cautioning that currency movements are never linear and often involve short-term swings.
Over the long term, the RBI governor noted that the rupee has depreciated by around 3 per cent annually on average, which he described as natural given India’s higher inflation compared with advanced economies. In the current calendar year, the rupee has weakened by about 5 per cent, compared with 2.5 per cent last year, pushing the longer-term average closer to 3.5 per cent. He reiterated that RBI interventions are aimed solely at preventing abnormal or disorderly moves.
The rupee’s recent performance reflects deeper structural trends. In 2025, the currency posted its largest annual fall in three years, closing at 89.87 after declining 4.72 per cent — its weakest showing since 2022. The rupee repeatedly touched record lows during the year amid heavy equity outflows and global trade uncertainty.
“The rupee’s performance in 2025 was largely a capital-flow story, with the RBI adopting a more pragmatic and flexible approach and allowing the currency to weaken,” said Gaura Sen Gupta, economist at IDFC First Bank. She said a potential US trade deal could offer temporary relief and lift the rupee towards Rs88.50 by March, but warned that underlying pressures could push the currency lower again.
Traders said unlike the sharp rupee rout of 2022, driven by aggressive US Federal Reserve rate hikes, the current phase is unfolding even as the dollar index has fallen about 9.5 per cent on expectations of US rate cuts. This divergence suggests domestic and regional factors are now playing a bigger role in shaping the rupee’s path.
“For now, markets appear to be betting that the path of least resistance remains downward — keeping the Rs25-per-dirham milestone firmly in focus and giving Gulf-based remitters a timely exchange-rate windfall,” they said.
- India
