Multiple bearish factors are putting pressure! The Indian Rupee may lead the decline in Asian currencies, nearing a historic low by the end of the year.

Notice that, as the United States imposes tariffs on the already fragile Indian economy, the Indian rupee will continue to be one of the worst performing currencies in Asia in the second half of this year. Analysts from Deutsche Bank and Barclays predict that due to weak foreign inflows combined with tariff impacts, the rupee exchange rate will fall to a historic low by the end of the year. Meanwhile, analysts predict that the Chinese yuan, Indonesian rupiah, Malaysian ringgit, and Philippine peso will strengthen. While most Asian countries have reached trade agreements with the United States, India faces a 25% tariff barrier due to stalled negotiations. With economic growth slowing down, the country's stock market has experienced $11 billion in capital outflows, and the central bank's interest rate cuts further weaken the domestic currency support. Further depreciation could worsen worries about imported inflation. "The rupee is likely to continue to underperform Asian currencies," said Dhiraj Nim, an economist and forex strategist at ANZ Bank in Mumbai, "Considering the growth risks brought about by tariffs, there is little improvement in foreign capital inflow." The Indian rupee is one of the worst performing currencies in Asia. Barclays estimates that high tariffs could reduce India's GDP growth by around 30 basis points. The market is now focusing on the Reserve Bank of India's policy meeting on August 6 for clues on interest rate direction and the rupee's trend. The central bank unexpectedly cut rates by 50 basis points last month and hinted at raising the threshold for future easing. Despite foreign exchange reserves approaching historical highs giving room for intervention, Citibank economist Samiran Chakraborty believes that given the "uncertainty of tariffs constraining the central bank's strong motivation to boost the rupee," any measures to curb depreciation will remain restrained. Last week, the rupee fell by 1.2% to 87.5275 rupees per US dollar, marking the largest weekly drop since December 2022. However, not all analysts are pessimistic. Some still expect the long-awaited US-India trade agreement to be reached reportedly, India is considering concessions such as increasing imports from the US and temporarily postponing retaliatory tariffs. "The key to the market and rupee forecasts lies in the trade agreement being postponed rather than completely falling through," said Michael Wan, senior currency analyst at Mitsubishi UFJ Bank, who raised his year-end exchange rate forecast from 84.50 to 87. Weak foreign inflows remain a headwind for the rupee. "The bond market is not seeing significant capital inflows, as the central bank indicates limited room for interest rate cuts," said Chandresh Jain, emerging market Asia rates and foreign exchange strategist at BNP Paribas. He added that high stock market valuations combined with economic slowdown have also weakened the country's attractiveness.