The Indian rupee rally for 0.8% against the US dollar on Thursday 16 October 2025 following US President Donald Trump’s remark that Indian Prime Minister Narendra Modi gave him assurance to stop Russian oil imports paid in rupee. The Reserve Bank of India intervened heavily to defend the currency closing at INR 88.0750 per USD. This story matters in South Asia because the Indian rupee rally Trump Modi oil remark could reduce trade frictions with the US ease pressure on regional currencies like the Pakistani rupee and Bangladeshi taka and alter energy supply chains amid Ukraine conflict tensions.
Modi Assurance Stop Russian Oil Rupee
US President Donald Trump stated in a White House press briefing on Wednesday 15 October 2025 that Prime Minister Narendra Modi assured him India would halt purchases of Russian crude oil. Trump said “I was not happy that India was buying oil and he assured me today that they will not be buying oil from Russia. That’s a big step.” This Modi assurance stop Russian oil rupee comes after US concerns over India’s discounted Russian oil imports which reached 2.1 million barrels per day in 2024 according to official data from India’s Ministry of Petroleum and Natural Gas.
The assurance addresses US punitive tariffs on Indian exports imposed due to these imports. Trump noted the process might take time calling it “a little bit of a process but that process will be over soon.” Without direct Indian government statement the claim relies on Trump’s account.
India’s reliance on Russian oil grew post-2022 Ukraine invasion with payments often in rupees to bypass Western sanctions. Official figures from India’s commerce ministry show Russian oil accounted for 40% of imports in fiscal 2024-25 up from 2% pre-war. The Modi assurance stop Russian oil rupee if implemented could shift sourcing to Middle Eastern suppliers impacting global oil prices and Russia’s war funding.
Indian Rupee Strengthens After Trump Statement
The Indian rupee strengthens after Trump statement marking its best day in nearly four months. Traders attributed the 0.8% gain to the Indian rupee rally Trump Modi oil remark combined with RBI’s aggressive dollar sales. State-run banks sold dollars on RBI’s behalf triggering stop-losses on long dollar positions and squeezing speculative bets against the rupee.
RBI Governor Sanjay Malhotra stated at an IMF-World Bank event in Washington on Wednesday 15 October 2025 that the central bank does not target any specific rupee level. This reiterates RBI’s policy of managing volatility rather than fixing rates. Market participants viewed the intervention as a reset similar to February 2025 when RBI cleared speculative positions.
Data from RBI’s weekly statistical supplement shows foreign exchange reserves stood at USD 704 billion as of 10 October 2025 providing ample ammunition for defence. The one-month non-deliverable forward suggests the rupee may open between 87.60 and 87.70 on Friday indicating potential extension of the Indian rupee rally Trump Modi oil remark.
Asian currencies also supported the move with the dollar index softening 0.3%. A portfolio manager at a Singapore-based hedge fund said “Trump’s remarks raise expectations of a potential trade deal between India and the US and when you add what happened yesterday the rupee looks set to rally further.” A spot trader at a private bank added “The RBI has completely flipped the script; what was a one-way short-rupee market is now looking two-way.”
Background
India’s oil imports from Russia surged after Western sanctions offered discounts up to USD 30 per barrel. Payments in rupees helped Russia accumulate INR balances estimated at INR 500 billion by mid-2025 per commerce ministry reports. This arrangement drew US ire leading to 25% tariffs on Indian steel and aluminium in 2024.
The Indian rupee had weakened 5% year-to-date hitting a record low of 88.8 on Tuesday 14 October 2025 before the rally. Factors included capital outflows of USD 12 billion in September 2025 and widening trade deficit at USD 30 billion monthly. The Modi assurance stop Russian oil rupee aims to mend ties potentially lifting tariffs and boosting exports worth USD 10 billion annually.
Geopolitically the shift aligns India closer to US-led alliances while maintaining strategic autonomy. South Asian neighbours watch closely as similar oil dependencies affect Sri Lanka and Nepal’s economies.
Economic Impacts in South Asia
The Indian rupee strengthens after Trump statement could stabilise regional trade. India’s exports to South Asia total USD 20 billion yearly per SAARC data. A stronger rupee makes Indian goods costlier but reduces import inflation for neighbours.
Energy security remains key. Bangladesh relies on Indian refined products while Pakistan imports Russian oil sporadically. If India diversifies the Modi assurance stop Russian oil rupee might increase regional oil prices by 5-10% analysts estimate.
RBI’s action signals confidence. Foreign direct investment inflows reached USD 50 billion in first half 2025 per government data supporting growth projections of 7% GDP for 2025-26 from Ministry of Finance.
What’s Next
Markets anticipate further gains in the Indian rupee rally Trump Modi oil remark if US-India trade talks progress. Trump hinted at removing tariffs post-assurance. RBI may continue interventions if pressures resume.
Oil importers monitor Russian supply disruptions. India’s state refiners like Indian Oil Corporation plan to boost Middle East contracts per press releases. Global oil prices dipped 1% on Thursday reflecting reduced Russian export expectations. The Indian rupee rally Trump Modi oil remark underscores how diplomatic assurances can swiftly influence currency markets with lasting effects on South Asian economies.
Published in SouthAsianDesk, October 16th, 2025
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