Indian Rupee Expected to Trade With Depreciating Bias as USD/INR Seen in 89–90 Range: Report
The Indian rupee is likely to trade on a weaker footing in the near term, with the USD/INR pair expected to move within the 89–90 range through December, according to a new assessment released on Monday by Bank of Baroda. The report highlighted that any significant movement in the domestic currency will depend largely on progress in the United States-India trade negotiations, which continue to influence global financial sentiment.
US-India Trade Outlook Key to INR Direction
Bank of Baroda noted that the much-discussed US-India trade deal remains the most important trigger for potential sharp currency movements. A positive breakthrough could lend support to the rupee, while delays or uncertainties may deepen depreciation pressures.
The bank further added that a highly anticipated rate cut by the US Federal Reserve is already priced in by markets, making the dollar relatively stable unless the Fed signals a major policy shift. This means currency fluctuations will be influenced primarily by geopolitical and trade-related developments rather than interest-rate surprises.
Limited Impact Expected From RBI and US Fed Decisions
According to the report, neither the Reserve Bank of India's Monetary Policy Committee (MPC) meeting nor the upcoming US Federal Reserve policy decision is likely to create substantial currency volatility. Since the interest-rate differential between the two economies is expected to remain unchanged, the rupee may not receive immediate support from central-bank actions.
The bank also does not expect the RBI to cut interest rates at the upcoming meeting, suggesting that domestic monetary conditions will remain steady in the short term.
Rupee Weakens Despite Strong GDP Numbers
The rupee eased by 0.8% in November 2025, closing the month at 89.46 against the dollar. This decline came even as India reported a stronger-than-expected economic performance, raising questions about external pressures affecting the currency.
The July–September GDP growth stood at 8.2% year-on-year, beating the previous quarter’s 7.8% and surpassing market expectations of 7.5%. The Gross Value Added (GVA) growth was reported at 8.1%, while nominal GDP rose 8.7%. Despite these robust fundamentals, the rupee struggled—especially surprising as the US dollar weakened during the same period.
Revised Growth Forecast Adds Macro Support
Crisil Limited has revised India’s GDP growth forecast for FY26 to 7%, up from its earlier projection of 6.5%. The improved outlook reflects confidence in domestic consumption, steady government spending, and continued economic resilience.
Stronger economic activity, however, has not yet translated into currency strength, as external headwinds, including global interest-rate expectations and trade-related uncertainty, continue to weigh on the INR trajectory.
Global Markets Expect US Fed Rate Cut
Expectations around the US Federal Reserve’s next policy decision continue to guide market sentiment globally. According to the CME FedWatch tool, the probability of a US Fed rate cut in December stands close to 90%, suggesting broad consensus that the rate-hike cycle has likely peaked.
A US rate cut typically reduces the appeal of the dollar, but since the move is already priced in, markets are focusing more on forward guidance and global trade developments.
Outlook for December
With multiple global and domestic variables aligning, Bank of Baroda expects the rupee to continue trading on the weaker side. Although strong GDP numbers present underlying economic strength, the near-term bias remains toward depreciation due to global uncertainties, trade-related developments, and shifting interest-rate expectations.
The 89–90 range for USD/INR reflects these mixed signals—balanced between strong domestic fundamentals and external pressures that continue to overshadow the currency’s recovery prospects.
Final Thoughts
The latest signals around the rupee’s movement show that India’s economic strength alone cannot offset the influence of global financial forces. As the world waits for clarity on US-India trade relations and the Federal Reserve’s next steps, the rupee is expected to stay under pressure in the near term. While strong GDP growth provides long-term confidence, currency markets remain sensitive to global trends, making external developments the key driver for December’s trading pattern.
