Forex – Rupee Seen Steady Near 90 by FY27 End

Forex –  The Indian rupee is projected to trade in the 89 to 90 range against the US dollar by the close of fiscal year 2027, according to a recent assessment by CareEdge Ratings. The forecast is anchored in expectations of a softer US dollar and a current account deficit that remains within manageable limits.

Recovery After Recent Volatility

In its latest report, CareEdge Ratings noted that the USD/INR pair has rebounded from earlier lows of nearly 92 to around 90.6. The turnaround followed progress on a trade agreement with the United States and the signing of a Free Trade Agreement with the European Union. These developments have helped calm investor concerns and ease pressure on the domestic currency.

The improvement reflects a shift in market sentiment, with traders responding positively to clearer trade policies and reduced uncertainty in global commerce. Despite this rebound, the rupee is still about 0.5 percent weaker compared to its level a month ago, suggesting that external headwinds have not entirely faded.

Foreign Investment Likely to Support Stability

The report indicates that diminishing trade-related risks could encourage a revival in foreign capital inflows. As investor confidence strengthens, higher inflows are expected to add depth to the foreign exchange market and provide greater support to the rupee.

Stronger inflows typically reduce the need for aggressive currency management. Analysts at CareEdge Ratings believe that if volatility continues to ease, the Reserve Bank of India may gradually reduce its intervention in the forex market. Over recent months, the central bank had stepped up its dollar sales and purchases to prevent sharp fluctuations and maintain orderly market conditions.

Dollar Weakness Alters Currency Dynamics

Global developments have also played a significant role in shaping the rupee’s trajectory. The dollar index has softened amid growing expectations that the US Federal Reserve could begin cutting interest rates. A moderation in US inflation has reinforced that outlook.

Data showed that inflation in the United States eased to 2.4 percent in January, down from 2.7 percent in the preceding two months. The cooling price trend has strengthened the case for policy easing, which in turn has weighed on the dollar.

A weaker dollar generally benefits emerging market currencies, including the Indian rupee. It tends to reduce depreciation pressure and improve investor appetite for higher-yielding assets in developing economies.

Medium-Term Outlook Remains Cautious but Stable

While the rupee’s recent performance points to improved stability, analysts caution that global financial conditions remain fluid. Factors such as shifts in US monetary policy, geopolitical developments, and commodity price movements could still influence currency markets.

Nevertheless, CareEdge Ratings has reiterated its projection that the USD/INR exchange rate will likely settle within the 89 to 90 band by the end of FY27. The outlook rests on two central assumptions: that the dollar will remain relatively subdued and that India’s current account deficit will stay under control.

A contained current account deficit reduces external vulnerability and limits the risk of sudden capital outflows. Combined with steady foreign investment and moderated volatility, these conditions could help maintain equilibrium in the foreign exchange market over the medium term.

Overall, the assessment points to a period of relative steadiness for the rupee, even as global economic signals continue to evolve.