Rupee Expected to Trade Between 85.5-87.5 per Dollar in FY26
Click to start listening
Synopsis
The Indian rupee demonstrated a stable performance in FY25 against global currencies, showing resilience despite a stronger dollar. Looking forward, the rupee is projected to trade between 85.5-87.5 per dollar in FY26, supported by favorable domestic conditions and potential changes in US tariff policies.
Key Takeaways
- The Indian rupee showed stability in FY25.
- A reversal in dollar strength boosted rupee performance.
- Expect volatility in FY26 due to US tariff policies.
- Domestic conditions appear favorable for the rupee.
- Projected trading range for FY26 is 85.5-87.5 per dollar.
New Delhi, April 2 (NationPress) The Indian rupee exhibited a relatively stable performance during FY25 when assessed against other global currencies, as a stronger dollar impacted all major currency pairs, according to a report released on Wednesday.
However, as the year drew to a close, a shift in dollar strength and Foreign Portfolio Investor (FPI) inflows into debt facilitated a surge in the rupee, which gained as much as 2.4 percent in a single month, as reported by Bank of Baroda (BoB).
The upcoming year is expected to be characterized by volatility, pending clarity on US tariff policies, which will also influence the US Fed’s rate decisions, subsequently affecting dollar behavior.
“Domestically, the rupee is anticipated to gain support from enhanced growth prospects, reduced inflation, and stable external deficits. We predict the rupee will trade within the range of 85.5-87.5 per dollar in FY26,” stated Aditi Gupta, Economist at Bank of Baroda.
FY25 proved to be a fascinating year for the rupee, experiencing phases of stability, sharp depreciation, and subsequent consolidation.
While the first seven months of the year were characterized by a largely rangebound currency, the latter part witnessed significant fluctuations in rupee movement.
The outcome of the US presidential elections in November acted as a major catalyst for the global forex market, with a victory for Donald Trump casting uncertainty over US growth and inflation trends. This prompted a notable repricing of Fed rate cut expectations, enhancing dollar demand.
“The rupee’s performance varied accordingly. From March to October, it depreciated by only 0.8 percent, with average daily annualized volatility at multi-year lows of just 1.5 percent,” Gupta noted.
While robust domestic fundamentals supported a stable currency in the initial part of the year, the shifting global landscape significantly influenced the domestic currency’s performance in the latter half.
Looking ahead, the US tariff policy will be crucial in determining the trajectory of global currencies.
“Markets have largely adjusted to US tariff actions after some volatility; however, this balance will once again be tested,” the report indicated.
On the domestic front, conditions remain favorable for the rupee, providing support to the domestic currency amid increasing external challenges.
