Outlook
INR remains under pressure from structural headwinds together with ongoing global risk-off tendencies, even as RBI liquidity measures provide some stabilisation. The currency is hovering around multi-month ranges with recent levels showing the rupee trading weak versus the dollar and other key peers. The RBI has injected liquidity through bond purchases and USD/INR swap operations totaling around $32 billion, which has helped curb sharp moves, but broader forces from US policy, global risk appetite, and India’s current account dynamics keep the outlook delicate. In the near term, the rupee is likely to stay within a broad range, with episodic moves tied to domestic data prints, policy cues, and shifts in external risk sentiment. As trade tensions evolve and foreign investor sentiment fluctuates, the INR could test either end of its recent range.
Key drivers
- US-India trade relations: Tariffs imposed in April 2025 led to a depreciation backdrop; markets will watch for progress toward a broader US-India trade deal that could stabilise the rupee. (Moneycontrol)
- Foreign Portfolio Investment (FPI) outflows: In 2025, foreign investors withdrew substantial funds from Indian equities, reducing demand for INR and boosting USD demand. (entri.app)
- Current account deficit: October 2025 saw a widened trade deficit of $41.68 billion, driven by higher gold imports and weaker US-bound exports, adding to rupee downside pressure. (FXStreet)
- RBI interventions: The RBI’s liquidity support, including USD/INR swaps and bond purchases, aims to stabilise the currency amid volatility. (Union Bank of India)
- Global economic factors: The US Federal Reserve’s policy stance and global risk aversion influence capital flows and INR dynamics. (ebc.com)
Range
INRUSD at 0.010885 is 2.1% below its 3-month average of 0.011124, having traded in a stable 4.1% range from 0.010864 to 0.011304. INR/EUR at 0.009096 is 4.6% below its 3-month average of 0.009531, with a volatile 8.2% range from 0.009085 to 0.009826. INR/GBP at 0.007883 is 5.4% below its 3-month average of 0.008332, trading within a 10.0% range from 0.007872 to 0.008659. INR/JPY at 1.6671 is 3.9% below its 3-month average of 1.7344, within a 6.7% range from 1.6648 to 1.7759.
What could change it
- Progress on US-India trade deal or de-escalation of tariffs that improves bilateral relations and reduces policy uncertainty.
- Reversal or slowdown of FPI outflows, or net FPI inflows into Indian equities that support INR demand.
- Improvement in current account dynamics (for example, a rebound in exports or a moderation in gold imports) coupled with sustained RBI liquidity support.
- Shifts in RBI policy stance or renewed liquidity interventions, if volatility re-emerges.
- Changes in global policy outlook, especially Federal Reserve rate actions and overall risk appetite, that alter capital flows into EM currencies like the INR.
