The Indian rupee (INR) has remained weak throughout 2025, declining from around ₹83.3–83.5 in January to approximately ₹88.6–88.8 per US dollar by mid-November, reflecting various global and domestic challenges.
The depreciation of the currency has been influenced by factors such as a robust US dollar, elevated oil prices, and ongoing Foreign Institutional Investment (FII) outflows, with India’s exports also facing pressure from continuing US tariffs and wider trade tensions.
In the past week, the rupee has strengthened due to positive news regarding a potential US-India trade agreement. Experts indicate that optimism surrounding an imminent US-India bilateral trade deal has offered some support to the rupee recently. President Trump has mentioned that both nations are “pretty close” to finalising a fair trade agreement, which would reduce tariffs and could enhance economic relationships.
The rupee fell by 15 paise to 88.65 against the dollar in early trading on Wednesday, impacted by high crude oil prices and outflows of foreign funds. According to reports, forex traders mentioned that renewed hope regarding the India-US trade agreement provided some support for the domestic currency at lower levels.
On Tuesday, the rupee began to show signs of appreciation, benefiting from a weaker US dollar and revived optimism about US-India trade talks. While the movement was modest, it signified a potential shift in momentum back in favour of the rupee after weeks of pressure.
Experts believe that the ongoing US-India trade negotiations are likely to have a positive effect on the Indian rupee.
“A successful US–India trade deal is likely to have a supportive impact on the Indian rupee. Greater market access and increased exports to the US can lead to higher dollar inflows, strengthening the rupee, while improved investor confidence may encourage more foreign investment into India,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
However, Rahul Kalantri believes that if the agreement results in a surge of US imports into India, dollar demand may rise and put mild pressure on the rupee. In the short term, currency markets may witness volatility due to speculation, but medium-term sentiment is expected to remain positive for the rupee if the trade deal boosts exports and capital inflows, explained Kalantri.
MSCI Review led inflows to support INR
Forex traders noted that the MSCI Review could lead to increased foreign fund inflows. The global index provider MSCI revealed the addition of Fortis Healthcare, GE Vernova T&D India, One 97 Communications (Paytm), and Siemens Energy India to its Global Standard Index.
Traders believe these modifications will prompt passive investments in these stocks as global funds realign their portfolios.
“As these passive inflows pour in, they could provide an additional cushion to the rupee in the near term, offsetting any temporary weakness from global uncertainty,” said CR Forex Advisors MD Amit Pabari.
INR Outlook
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund said that assuming a credible US–India trade agreement is reached, it should be a net positive for the rupee over the medium term — but don’t anticipate a steady rise.
” I forecast INR ₹83–84.5 over the coming year, with short-term fluctuations driven by oil prices, Fed policy, and portfolio flows,” said Gulati.
Why 83–84.5 and not a much stronger prediction? Mohit explained that the forecast reflects a balanced perspective: the deal reduces tail political risk and should lessen the premium on India-specific risk, but it won’t eliminate global FX influences. With the Fed remaining the primary force behind INR movements, and India’s oil import costs and external financing needs quite significant, expecting a move into the high-70s is optimistic without decisive Fed cuts and sustained, substantial inflows.
“Therefore, the 83–84.5 range is my baseline — an improvement from the current spot (based on deal confidence) but cautious compared to a full risk-on rally,” added Mohit Gulati.
Further, Jigar Trivedi, Senior Research Analyst at Reliance Securities, said that India–US trade deal, is likely to enhance market access for Indian goods and spur capital inflows, potentially improving India’s current account position.
Trivedi added the deal could strengthen the rupee toward ₹86.5 per dollar by year-end, provided the deal addresses tariff irritants and ensures smoother trade in services and manufacturing.
He believes the trade pact could tilt sentiment in favour of the rupee, but sustained appreciation will depend on how swiftly both nations translate diplomatic goodwill into actionable economic reforms.
“USDINR pair may face resistance near 89 level, while support is placed at 86,” Trivedi said.
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