Rupee Recovery Hinges on US Trade Deal, Say FX Strategists; Currency Forecast to Regain 1%

The primary drag is coming from the US. President Donald Trump’s punitive ⁵50\% tariff on Indian goods has soured foreign investor sentiment massively.⁶

The result? Foreign investors have sold off around ⁷17\ \text{billion} in Indian equities this year.⁸ When capital flows dry up like that, the currency will tank. That’s a huge, constant pressure.

Jotting down the key financial data:

• Current Low: ⁹90.29/\ on Wednesday.¹⁰

• Annual Depreciation: Nearly ¹¹5\% for the year.¹²

  Economic Backdrop: Robust ¹³8.2\% GDP growth in the July-September quarter (which should have helped, but didn’t).¹

• RBI Intervention: The RBI has been selling dollars, but even that hasn’t stopped the slide.

 The Forecast: Small Gains Tied to Politics

The Reuters poll of ¹⁵$37$ forex analysts suggests the rupee will make a small recovery, but it will be a narrow, contained move in the near term.¹⁶

. Forecast by Feb 2026: Expected to rise nearly ¹⁷1.1\% to ¹⁸88.91/\.¹

• Forecast by May 2026: Marginally stronger at ²⁰88.83/\.²¹

• 12-Month Forecast: Gain about ²²0.3\% to ²³89.65/\.²⁴

The consensus is that the long-awaited India-US trade deal is the single biggest catalyst.

A. Prasanna from ICICI Securities Primary Dealership put it bluntly: “I was expecting some kind of India-U.S. trade deal to happen by November, and that hasn’t happened. But still, the base case is that it should happen before the financial year-end, so that itself will boost the sentiment for the rupee.”

The thing is, without that trade deal, the capital flows—FDI and equity—remain weak.²⁵ They don’t see anything right now that tells them the inflows can improve on a “sustainable basis.” But the analysts are hopeful the worst of the “outright depreciation or one-sided pressure” is ending.

End..

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