Rupee may weaken further as tariffs, visa rules and gold imports add pressure: BNP Paribas

The Indian rupee continues to face pressure as global and domestic factors weigh on investor sentiment.

Chandresh Jain, Rates & FX Strategist-EM Asia at BNP Paribas, said, “The sentiment is not very good. We had a lot of negative news regarding INR – equity outflow, 50% tariff from the US, and the big news of H-1B visa hike.” He added that India, being a net importer of gold, is also adding pressure as global gold prices rise.

On the outlook, Jain noted that the rupee could weaken further. “87 to 89 is our range target. I think we are very close to that. The trend will continue, though the velocity of depreciation might slow down in October,” he said.

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Samiran Chakraborty, Chief Economist at Citi India, explained the possible impact of tighter US visa rules. He said the effect could come through three channels: remittances, software services exports, and global capability centers (GCCs). “About 28% of India’s remittances come from the US, roughly $35 billion a year. Our sense is that H-1B visa holders are not the majority of remitters, so the impact may be smaller than the market fears,” he said.

Chakraborty also noted that rupee depreciation could support Indian exporters. However, he cautioned that expectations of further weakness could deter investment flows.

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Jain confirmed that the Reserve Bank of India (RBI) has been active in the market. “We heard RBI is trying to sell dollars at that level,” he said, adding that on some trade-weighted measures, the rupee still looks expensive compared with the Chinese yuan.

Chakraborty added that fewer students going to the US could reduce education-related outflows, while higher domestic wage payments by software companies could support local consumption over time.

For the full interview, watch the accompanying video

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