Key Takeaways
- The Indian rupee is unlikely to see major depreciation in the near term, according to Union Bank of India.
- The currency has already weakened by 4% this year, trading near record lows.
- Technical analysis suggests a range-bound movement between Rs 88.80 and Rs 89.50 through December.
The Indian rupee is expected to remain stable in the short term despite recent pressures, with Union Bank of India forecasting no significant further depreciation. The currency has already declined by approximately 4% since the start of 2025.
Current Market Position and Pressures
The rupee is currently trading in a tight range against the US dollar, facing multiple challenges. These include substantial foreign institutional investor (FII) outflows exceeding $14 billion, a likely widening current account deficit, and delayed India-US trade agreement negotiations.
Recent data shows the currency touched a record low near 89.4950, with the closing rate at 89.4575 – just shy of the previous week’s low.
Support Factors and Positive Indicators
Despite the pressures, several factors are providing support to the rupee. Easing inflation and GST-related reforms are helping stabilize the currency. The Union Bank report notes that domestic equity inflows and progress in India-US trade talks could strengthen the INR toward Rs 88.50/$.
“Given that the rupee has already weakened by roughly 4 per cent this year, we do not expect significant further depreciation in the near term,” the report stated.
Future Outlook and Technical Forecast
From a technical perspective, the rupee is projected to remain range-bound between Rs 88.80 and Rs 89.50 through December. Rs 88.80/USD is identified as a key interim support level.
The report highlighted that “sustained domestic equity inflows or tangible progress in India-US trade negotiations could strengthen the INR toward Rs 88.50/$”.
Potential Scenarios for Currency Movement
A combination of positive developments could significantly shift the rupee’s appreciation threshold. These include finalization of the India-US BTA, RBI rate cuts, revived FII inflows, and anticipated US Federal Reserve rate cuts that would weaken the dollar globally.
Conversely, the rupee faces strong resistance near Rs 89.50, with a break above this level potentially triggering a move toward Rs 89.90. The report cautioned that “geopolitical and tariff developments will remain central drivers of market sentiment.”
