Recent forecasts on the INR to USD exchange rate indicate a bearish outlook for the Indian Rupee, primarily driven by a confluence of domestic and international factors. Analysts point to the US Federal Reserve's potential easing of monetary policy as influencing the USD's depreciation. With US inflation having dropped to 2.7% in November, expectations for rate cuts beginning in early 2026 have emerged. This adjustment in monetary policy could narrow interest rate differentials, subsequently diminishing the attractiveness of dollar-denominated assets.
On the Indian side, the rupee faces significant pressure from India's widening trade deficit, which is fueled by rising imports outpacing export growth, thereby increasing demand for US dollars. Experts highlight that geopolitical tensions, particularly the US–India trade relations marked by high tariffs on Indian exports, further complicate the rupee's situation. The surge in gold imports, which skyrocketed by 200% in October, has compounded these challenges, adding to the current account deficit and weakening the rupee.
Despite the ongoing challenges, the Reserve Bank of India has been actively intervening in the forex market to stabilize the INR, though this has implications for the nation’s foreign reserves. Analysts suggest that the current INR to USD rate of 0.011138 remains stable, just 0.8% under its 3-month average, suggesting volatility within a narrow range but with a general tendency for depreciation as external pressures mount.
Economists caution that the interplay between US fiscal policies and ongoing global economic sentiment will play a crucial role in the near-term direction of the INR against the USD. Overall, the consensus points to a continued weakening of the Indian Rupee as the Federal Reserve's actions and India's economic fundamentals remain in focus.
