Outlook
The INR faces ongoing pressure from a high trade deficit and persistent capital outflows, but RBI FX interventions have helped limit sharper moves. Analysts forecast the rupee may weaken toward 90 per dollar by March 2026, with potential recovery if U.S.-India trade talks progress and capital inflows stabilize.
Key drivers
- Trade deficit and tariffs: October 2025 saw a large trade gap ($41.7 billion) influenced by U.S. tariffs on Indian exports, weighing on the rupee.
- Capital outflows: FIIs pulled about $17.5 billion from Indian markets in 2025, adding to downside pressure.
- RBI interventions: The RBI has actively intervened in the FX market using spot moves and non-deliverable forwards to stabilize the rupee.
- Forecasts: Markets expect the rupee to weaken toward 90 per dollar by March 2026, with a potential for recovery if trade negotiations with the U.S. make progress.
Range
INR/USD is at 90-day lows near 0.010975, about 1.7% below its 3-month average of 0.011169, having traded in a very stable 3.9% range from 0.010975 to 0.011398.
INR/EUR is at 90-day lows near 0.009358, about 2.4% below its 3-month average of 0.009593, having traded in a stable 5.0% range from 0.009358 to 0.009826.
INR/GBP is at 90-day lows near 0.008166, about 2.7% below its 3-month average of 0.008393, having traded in a stable 6.0% range from 0.008166 to 0.008659.
INR/JPY is at 14-day lows near 1.7358, just below 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 negotiations could support the rupee and curb the downside, potentially reinforcing the recovery scenario.
- A shift in capital flows, with renewed FII investments, would also support INR strength and help push the pair back toward the 3-month average.
- A continued RBI intervention stance, if maintained or adjusted, could anchor volatility and limit sharp moves in the near term.
