Indian currency concludes its turbulent week on a tranquil pace, maintaining a potential minor descent trend.
The Indian Rupee has shown a mixed performance in recent days, with the currency expected to settle in the 87.50-88.50 range in the near-term. This prediction comes after the rupee touched a more than two-week high earlier in the week, only to retreat to near all-time lows.
The dollar's strength has been a significant factor in the rupee's fluctuations. The dollar index was up 0.2% at 97.5, and Asian currencies were mostly weaker as a result. The yield on the benchmark 10-year Indian bond was up 3 bps on the week, while the yield on the 10-year U.S. Treasury was up 6 basis points, last at 4.12%.
The comments were made by a trader at a state-run bank, who noted that the bias for the rupee is still tilted towards modest depreciation despite the recent uptick. This depreciation could be attributed to concerns over U.S. tariffs and foreign portfolio flows in recent weeks.
However, the influence of the Federal Reserve's policy decision on the Indian rupee's direction is less clear. The Fed lowered its key interest rates by 0.25 percentage points in meetings around September 17, 2025, bringing the U.S. rate to a range of 4 to 4.25 percent. This rate cut has generally strengthened the euro against the dollar, but there is no direct information from the search results about the specific impact of this Fed decision on the Indian rupee's exchange rate.
Despite these challenges, recent talks between New Delhi and Washington have spurred optimism on an eventual trade deal. This optimism, coupled with the resilience shown by India's benchmark equity indexes, the BSE Sensex and Nifty 50, which ended the week higher by about 0.8% each, offers a glimmer of hope for the Indian rupee.
The sterling led losses among G10 currencies on Friday, but the Indian rupee appreciated by 0.2% on a weekly basis. The rupee closed at 88.09 against the U.S. dollar on Friday, indicating a slight improvement from its all-time lows.
MUFG predicts a medium-term outlook for the U.S. dollar to remain tilted towards a downside due to concerns about U.S. labor market weakness and potential for deeper policy easing. This prediction could bode well for the Indian rupee in the long run, assuming the currency can weather the current storm.
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