UBS Investment Bank projects that the Indian rupee will depreciate to 92 per U.S. dollar by March 2026. This forecast suggests an approximate 2% decline from its current level of near 90 per dollar. The rationale behind this prediction lies in the expectation that any positive impact resulting from a potential U.S.–India trade deal announcement is likely to be short-lived.
According to Rohit Arora, head of Asia FX & rates strategy at UBS, the Reserve Bank of India (RBI) will likely move to replenish its foreign exchange reserves, which will undermine any sustained recovery of the rupee. Arora noted that while a trade deal could offer some marginal benefits, the recent drawdown of the RBI's foreign exchange reserves is a critical factor limiting any significant appreciation of the rupee. The central bank's substantial short dollar position in the forward market necessitates future dollar purchases, which will exert downward pressure on the rupee.
The rupee's nearly 5% decline in 2025 was largely attributed to equity outflows and the continuation of U.S. tariffs. Arora contends that concerns regarding growth, rather than trade uncertainties, are the primary drivers of pressure on India's capital account, with relatively high equity valuations playing a significant role. Despite India's reported robust real GDP growth, slower nominal growth figures have dampened earnings expectations, contributing to record sales of Indian equities by foreign investors in the past year.
Even though the RBI's interventions aim to stabilize the currency, the Indian rupee faces challenges from foreign selling of equities and uncertainty surrounding a U.S.–India trade deal. Goldman Sachs forecasts the rupee at 89.50 in three months and 91 in six months.
In late 2025, the Indian rupee hit a fresh all-time low, emerging as one of the weakest global currencies that year. Anindya Banerjee of Kotak Securities and Naveen Mathur of Anand Rathi attributed the sharp depreciation to FII outflows, yen carry trade unwinding, Bank of Japan rate hike risks, and trade deficit dynamics. At that time, experts predicted levels of around 88 to 90 in the near future once the trade deficit numbers improve. The FX reserves had increased to $650.26 billion.
