MUFG expects RBI intervention and prospective capital inflows to slow the Rupee’s depreciation, although oil prices and the US Dollar remain important risks.
The US Dollar to Indian Rupee (USD/INR) exchange rate has eased to around 95.29 after reaching levels above 96.90 during July.
USD/INR nevertheless gained 0.78% last month and remains around 6% higher in 2026.
Over the past three months, the Rupee has strengthened against most major currencies but weakened modestly against the Dollar, Yen, Rand and Yuan.
MUFG says the Rupee’s latest recovery was driven by “a combination of RBI dollar sales, a softer US dollar and lower crude oil prices”.
The bank noted that intervention intensified as USD/INR approached 96.15, helping the Rupee deliver “its strongest one-day gain in more than a month” on July 27.
Lower oil prices also provided support by easing concern over India’s import bill, although MUFG warned that this benefit “could unwind quickly if crude rebounds”.
Attention now turns to the Reserve Bank of India’s August policy meeting.
MUFG expects the repo rate to remain at 5.25%, but believes risks are tilted towards higher rates later this year as policymakers balance weaker growth against inflation, oil and monsoon risks.
The bank said: “Our bias is that intervention and prospective FCNR(B)-related inflows should limit disorderly depreciation.”
MUFG therefore sees “the near-term balance” as more stable around current levels, with the RBI’s communication, oil prices and broader Dollar direction deciding whether the recovery can extend.
Its formal forecasts put USD/INR at 92.50 in the third quarter, 93.00 at year-end, 94.00 in the first quarter of 2027 and 95.00 by June 2027.
That forecast profile implies a stronger Rupee over the coming months before gradual depreciation resumes next year, consistent with MUFG’s view that RBI measures should make future weakness slower and more orderly.
Our currency coverage draws on live market data, official economic releases and published bank research.
