'Not worried about rupee becoming a reserve currency': US Secy Bessent

As Trump tariffs hit India's trade, US Treasury Secretary Scott Bessent shot down talk of the rupee gaining 'reserve' status, citing its weakness versus the dollar

US Treasury Secretary Scott Bessent has dismissed speculation that India’s rupee could emerge as a reserve currency, even as New Delhi expands trade settlement options with Brics partners.

 

“There are a lot of things I worry about. The rupee becoming the reserve currency isn’t one of them,” Bessent said in an interview with Fox Business, pointing out that the Indian currency is “near an all-time low versus the US dollar”.

 

Indian Rupee under pressure

The rupee has been under pressure this week. On Tuesday, August 26, it depreciated 13 paise to close at 87.69 against the dollar. However, on Thursday, August 28, the local unit gained 10 paise to 87.59 in early trade, supported by a weaker dollar index and easing Brent crude prices.

 

According to a report by The Hindu, the Reserve Bank of India intervened to prevent the rupee from breaching its record low, though foreign institutional investor outflows and weaker domestic equities capped further gains. The recovery came despite the additional Trump tariff hike on Indian goods that took effect on Wednesday.

 

What is a reserve currency?

A reserve currency is a foreign currency held in significant quantities by central banks and financial institutions as part of their foreign exchange reserves. These reserves help stabilise a country’s currency, reassure foreign creditors, facilitate international trade, and provide a buffer during times of crisis.

 

The US dollar overtook the British pound as the world’s dominant reserve currency in the 1920-1944.  

Here's how the US dollar became the world's most powerful reserve currency.

 

Brics and ‘de-dollarisation’

While news reports have suggested that members of the intergovernmental grouping of Brazil, Russia, India, China, and South Africa (Brics) are settling parts of their trade in rupees, India has repeatedly clarified that it has no “de-dollarisation” plan. At the end of 2024, then-RBI governor Shaktikanta Das said the central bank’s focus was on de-risking domestic trade from potential geopolitical disruptions, not on replacing the dollar.

 

Furthermore, discussions on a cross-border payments system have made little progress in a decade. In its latest meeting in July, the group believed efforts have been hampered by non-convertible currencies, sanctions on Russia and Iran, and cost-sharing disputes.

 

China, meanwhile, has stepped up efforts to promote the yuan’s global role, seeking to capitalise on disarray in the US.

 

US, India tariff tensions

Bessent’s comments came against the backdrop of rising trade tensions. On Thursday, President Donald Trump’s 50 per cent tariff on Indian goods came into force, following a 25 per cent penalty earlier this month over India’s purchases of Russian crude and weapons. 

 

Bessent maintained that Washington has leverage in the standoff. “The US is the deficit country. When there is a schism in trade relations, the deficit country is at an advantage. It’s the surplus country that should worry,” he said.

 

Bessent said while India had “profiteered” from Russian oil, long-term cooperation between the two countries was more significant. “India is the world’s largest democracy, and the US is the world’s largest economy. At the end of the day, I think we will come together,” he said.