On August 29, 2025, the Indian rupee plunged to an all-time low against the offshore Chinese yuan, touching ₹12.3862 per yuan. This marked a 1.2% weekly decline and a 1.6% drop over the month. Over the past four months, the rupee has depreciated by nearly 6% against the yuan as trading dynamics shifted in favor of Chinese currency.
What’s Fueling the Decline?
- Tariff Disparities: New 50% U.S. tariffs on Indian exports contrast with the lower 30% tariffs on Chinese goods, making Chinese products relatively cheaper in global markets.
- Competitive Edge for Indian Exports: While the rupee’s slide hurts purchasing power, it could enhance price competitiveness of Indian goods in sectors like textiles, engineering, and chemicals, especially for U.S.-bound markets. Economists suggest this could help partially offset the drag of increased U.S. tariffs and narrow India’s trade deficit with China.
- RBI’s Perspective: The Reserve Bank of India (RBI) closely monitors the yuan–rupee exchange rate. The rupee’s relative softness against the yuan may be welcomed, as it bolsters export competitiveness without breaching its comfort zone versus the U.S. dollar.
Reuters
At a Glance: Rupee vs Yuan — Key Snapshot
| Metric | Value/Trend |
|---|---|
| Current Rate | ₹12.3862 per Chinese yuan |
| Monthly Decline | Approximately 1.6% |
| 4-Month Drop | Nearly 6% depreciation |
| Driving Factors | Higher U.S. tariffs on Indian goods vs Chinese |
Why This Matters for India’s Trade & Growth
- Export Strategy Adjusted: The rupee’s weakness can make Indian exports more attractive compared to Chinese counterparts, helping local industries capture more global market share amid trade tensions.
- Import Cost Impact: Conversely, imports priced in yuan (e.g., electronics, raw materials) may become costlier, potentially impacting inflation and input costs for businesses.
- Broader FX Sensitivities: The divergence in rupee performance against the yuan versus the dollar indicates shifting investor sentiment and structural trade imbalances—areas the RBI is carefully navigating.
