Bias
Markets see the rupee under downside pressure toward 90 per dollar by March 2026, with a potential for a rebound if trade negotiations progress. The path ahead remains closely tied to U.S.-India tariff talks and to capital flows.
The rupee has been pressured by a sizable October 2025 trade deficit (about $41.7 billion) and persistent capital outflows, while the RBI has been active in FX markets to steady moves. If trade negotiations advance and tariff frictions ease, the downside could be limited and a modest recovery possible.
Key drivers
- Trade deficit and tariffs: October 2025 trade deficit of $41.7 billion, influenced by U.S. tariffs on Indian exports.
- Capital outflows: FIIs withdrew about $17.5 billion from Indian markets in 2025, adding to rupee downside pressure.
- RBI interventions: The RBI has actively intervened in the FX market using spot operations and non-deliverable forwards (NDFs) to stabilise the rupee.
- Currency forecasts: Markets expect the rupee to weaken toward 90 per dollar by March 2026, with a potential for recovery if trade negotiations progress.
Range
INR/USD is at 90-day lows near 0.010999, 1.5% below its 3-month average of 0.011174, having traded in a very stable 3.6% range from 0.010999 to 0.011398.
INR/EUR is at 30-day lows near 0.009447, 1.6% below its 3-month average of 0.0096, having traded in a stable 5.0% range from 0.009362 to 0.009826.
INR/GBP is at 0.008197, 2.4% below its 3-month average of 0.008397, having traded in a stable 5.8% range from 0.008183 to 0.008659.
INR/JPY is at 1.7395, near its 3-month average, having traded in a stable 4.3% range from 1.7026 to 1.7759.
What could change it
- Progress in U.S.-India trade talks that reduces tariffs would curb downside and support a recovery.
- A shift toward net FII inflows or a reduction in outflows, accompanied by softer FX pressure, would help.
- A change in RBI policy or the level of FX intervention (either more restraint or expanded action) could alter the path.
