The Indian rupee’s recent slide past the psychologically important ₹90-per-dollar mark has once again brought currency risk into sharp focus. While currency depreciation has been a long-term structural trend for India, the pace and persistence of the current move have serious implications for households planning future expenses in foreign currencies — particularly overseas education, international travel, and medical treatment abroad.
Financial experts warn that ignoring currency depreciation can leave investors dangerously underprepared when overseas goals finally materialise.
“Currency is not a short-term risk. It is a slow-moving but powerful force that compounds over time,” says Sachin Jain, managing partner at Scripbox.
Why the rupee is under pressure
Multiple macroeconomic forces are weighing on the rupee simultaneously. A widening trade deficit remains one of the biggest contributors. Record levels of gold imports, softer merchandise exports — especially to the US — and elevated energy costs have all added strain to India’s external balance.
“Record gold imports have contributed in a big way to the trade gap,” Jain notes.
According to market estimates, India’s current account deficit is expected to rise sharply in the coming financial year.
“Analysts expect India’s current account deficit to widen to 1.4 per cent of GDP in FY26, compared to just 0.6 per cent in FY25,” says Karan Aggarwal, co-founder and chief investment officer at Elever.
Global risk aversion has compounded the problem. Foreign institutional investors (FIIs) have pulled out nearly ₹1.55 trillion (around $17 billion) from Indian markets so far in 2025, driven by concerns over earnings growth, valuations, and global uncertainty.
“Uncertainty around the India–US trade framework and slower capital formation have also weighed on foreign inflows,” says Anooshka Soham Bathwal, founder and CEO of Dhanvesttor.
How a weak rupee hits overseas goals
The most direct impact of rupee depreciation is the rising rupee cost of dollar-linked expenses. A tuition fee of $1,000 costs ₹90,000 at an exchange rate of ₹90, but jumps to ₹1 lakh if the rupee weakens to ₹100 — without any increase in the actual fee.
“Even a modest annual depreciation compounds significantly over multiple years, creating large last-minute funding gaps,” Bathwal explains.
For families planning overseas education 8–10 years in advance, this compounding effect can derail carefully laid plans if not accounted for early.
Planning realistically for global expenses
Historically, the rupee has depreciated by 3–5 per cent annually against the US dollar, though the movement is rarely linear.
“With inflation and interest-rate differentials between India and the US narrowing, the pace of depreciation could moderate slightly,” says Chanchal Agarwal, chief investment officer at Equirus Family Office.
Despite this, most experts advise using the long-term average depreciation rate when planning for dollar-denominated goals. A common mistake is applying only domestic inflation assumptions — typically 6–8 per cent — while ignoring overseas inflation and currency erosion.
“The final education corpus can be materially different when overseas inflation and currency depreciation are factored in together,” Agarwal cautions.
Jain adds that investors funding overseas goals should target returns of at least 11–12 per cent, reflecting the higher hurdle created by currency risk.
Hedging against currency depreciation
Experts recommend embedding currency protection directly into long-term portfolios. One widely suggested approach is maintaining 15–20 per cent of equity exposure in overseas assets.
Indian investors can achieve this through feeder funds offered by domestic mutual fund houses, which provide access to global active funds, ETFs, and index strategies. Another option is investing via outbound structures in Gujarat International Finance Tec-City (GIFT City).
Global platforms such as Vested and INDmoney also allow direct exposure to foreign equities and ETFs.
Gold remains one of the simplest and most effective currency hedges.
“Gold prices reflect the international gold rate multiplied by the INR–USD exchange rate. That makes it a natural hedge,” Jain explains.
A 10 per cent allocation to gold can meaningfully cushion portfolios against currency-driven erosion. More sophisticated investors with exposure to specific countries such as Japan, the UK, the Eurozone, or the US may also use currency futures to hedge planned expenses, Aggarwal adds.
Common mistakes investors must avoid
One of the biggest errors is relying solely on domestic inflation assumptions while planning overseas education. Others attempt to time the rupee-dollar movement — a strategy experts agree is nearly impossible.
“Some investors swing to extremes — either trying to predict currency moves or shifting disproportionately into dollar assets,” Bathwal says.
Avoiding global diversification altogether is equally risky, as it increases vulnerability to both domestic market shocks and currency depreciation.
The bottom line
The weakening rupee is not a temporary inconvenience — it is a structural reality that demands proactive planning. By factoring in long-term depreciation, diversifying globally, and using effective hedges such as overseas assets and gold, Indian investors can protect their global dreams from being derailed by currency shocks.
