Rupee vs Dollar: Rupee's Volatility Against Dollar: How it Impacts Your Wallet and What to Expect

The Indian Rupee has experienced considerable fluctuation against the US Dollar in recent times, drawing significant attention from individuals and businesses alike. The currency has weakened by over 4% against the dollar, even breaching the 91-level mark in December. This depreciation has raised concerns for those planning to make payments in dollars, as it directly impacts their financial outlays.

Impact on Your Wallet

According to a Business Standard report, the Rupee has depreciated by 4. 3% so far in FY26. Last week, the Rupee hit a lifetime low of 91. 10 against the dollar, while after consistently reaching new lows for four consecutive sessions, the Rupee strengthened by approximately 1. 3% against the dollar by the end of the week, a recovery largely attributed to the intervention by the Reserve Bank of India (RBI). Market experts indicated that the RBI's move was aimed at curbing speculative positions and creating panic among traders who had taken long positions in dollars and short positions in rupees. Following this intervention, the Rupee fluctuated between 91. 10 and 89. 25, eventually settling at 89, while 29 in the final hour of trading on Friday, compared to 90. 26 in the previous session.

Despite the Central Bank's intervention leading to some improvement in the Rupee's value against the dollar, it doesn't mean your wallet will remain unaffected, while if you're planning to make any payments in dollars soon, such as tuition or exam fees for foreign education, expenses for foreign travel, ordering a gadget from abroad, or visa-related fees, the impact of the Rupee's depreciation can be clearly felt in your pocket. You will need to spend more Rupees to acquire the same amount of dollars, thereby increasing your overall cost, while this is particularly crucial for students and travelers whose plans are already set, as it directly affects their budget for international expenses.

Future Projections and Expert Opinions

Media reports suggest that after a 4. 1% depreciation so far in Calendar Year 2025 (CY25), the Rupee could stabilize around 90 per dollar by the end of December. Most experts anticipate the Rupee to reach approximately 88. 50 per dollar by the end of March, indicating a potential strengthening. However, different banks hold varying opinions on the future trajectory, while standard Chartered, for instance, projects the dollar level to be around 90 by December end and potentially 89. 5 by March end. IDFC First Bank foresees levels of 89. 50-90 by December end and 88. 5 by March end. CR Forex estimates the dollar to fluctuate between 89. 80-90. 20 by December end and 88. 80-89. 20 by March end. RBL Bank, on the other hand, anticipates the Rupee to be around 91 against the dollar by December end and between 92-93 by March end. Bank of Baroda projects the Rupee to be in the 89, while 5-90 range by December end and 90-91 by March end. These variations are critical for budgeting, as your payment deadline might expose you to different exchange rates.

Budgeting Strategies Amid Volatility

If you're planning to make dollar payments soon, it's advisable to base your planning around 90 rupees per dollar and keep some additional buffer. Every 1 Rupee change in the US Dollar-Rupee (USD-INR) rate increases your Rupee cost by 1,000 rupees for every 1,000 dollars. For example, if your payment is 3,000 dollars, a 1 Rupee change will increase your Rupee cost by 3,000 rupees, while this method allows you to factor in Rupee fluctuations into your budget, converting the 'Rupee fluctuation' into a quantifiable number that you can budget for. This proactive approach helps in mitigating unexpected financial burdens.

Understanding the Full Calculation

Currently, we've three levels to consider against the dollar: the first level is 88. 50, which could be reached by the end of March 2026; the second level is 90 dollars, which. Might persist until the end of December 2025; and a third level is 91 dollars, observed in December. If you need to make a 500 dollar payment, you would pay 44,250 rupees at the 88. 50 level, 45,000 rupees at the 90 level, and 45,500 rupees at the 91 level. If your payment is 2000 dollars, you would have to pay anywhere from 1. 77 lakh rupees to 1. 82 lakh rupees. For a 10,000 dollar payment, you might have to spend between 8. 85 lakh rupees and 9. 10 lakh rupees from your pocket. By understanding these calculations, you can prepare your budget according to your capacity and anticipate potential costs.

Risks Remain Even After RBI's Action

If you aren't a trader, two points are crucial. Firstly, the RBI is signaling that it doesn't want a one-sided depreciation, while market experts suggest that the central bank's dollar sales indicate it won't tolerate a 'one-way depreciation' scenario, which helps curb speculation and reduce two-way risks. Secondly, there are limits to intervention, while the RBI's capacity to intervene might be constrained by its large short positions in the NDF (Non-Deliverable Forward) and onshore forward markets. To maintain room for future action, it might need to unwind some positions around 88. 80.

According to forward market data, the RBI intervened by approximately 30 billion dollars between June and October – 18 billion dollars during June-September and 10 billion dollars in October, while the central bank's short dollar forward position increased from 59 billion dollars at the end of September to 63 billion dollars by the end of October. In October, the RBI was consistently supplying dollars to prevent the Rupee from weakening below 88. 80. When budgeting, assume a range, while even if the RBI takes a stance against excessive volatility, your payment plan should account for instability, especially when payment dates are fixed. This proactive approach ensures preparedness for any unforeseen financial burdens.