MUFG’s 94.00 USD/INR target is close, but oil near $96 and higher Treasury yields threaten further Indian Rupee gains.
The US Dollar to Indian Rupee (USD/INR) exchange rate slipped to 94.9523 early on Wednesday, placing MUFG’s 94.00 third-quarter forecast within roughly 1% of spot.
The pair has dropped from 95.6044 at Friday’s close and touched 94.7304 in early September.
When we last examined MUFG’s call, USD/INR was trading near 95.75.
Spot has since moved much closer to the target, although the external backdrop has become less friendly for the Rupee.
MUFG said: “We are currently forecasting USD/INR to move towards 94.00 over the next three to six months, before rebounding towards 96.00 next year as structural portfolio outflows, corporate repatriation and import demand reassert themselves.”
Its quarterly table puts USD/INR at 94.00 in Q3 2026, 94.50 in Q4, 95.50 in Q1 2027 and 96.50 by Q2 2027.
That path points to further near-term Rupee gains, followed by a gradual reversal next year.
The year-to-date chart shows USD/INR below its 20-day and 50-day moving averages after repeatedly failing to hold above 96, although the pair is still 5.53% higher in 2026.
RBI support has brought 94 closer
MUFG attributed the Rupee’s firmer footing to fading Dollar momentum and RBI foreign-currency mobilisation measures.
Foreign investors also bought around $470 million of Indian equities in the week ending 28 August, following roughly $500 million of inflows the previous week.
The bank added: “Existing foreign-currency inflows have enlarged India’s external buffer and curtailed the risk of sharp INR depreciation, but the removal of incremental liquidity support, accelerating credit growth and the lagged inflationary effects of earlier oil-price increases point towards higher INR rates.”
India’s economy subsequently expanded by a stronger-than-expected 7.8% in the April-June quarter, reinforcing the case for tighter domestic policy.
MUFG said: “We continue to expect 50bp of RBI tightening beginning in December, with the central bank focused on limiting excessive FX volatility rather than engineering sustained rupee appreciation.”
Oil and US yields threaten the Rupee rally
There is a catch, though.
Since MUFG published its forecast, Brent crude has climbed to $95.68 a barrel as renewed US-Iran strikes revived supply concerns.
That raises India’s import bill and inflation risk, while higher US yields make emerging-market assets less attractive.
The US 10-year Treasury yield closed at 4.79% on Tuesday, up from 4.73% on Friday.
MUFG’s 94.00 target has plainly come into view, but a smooth decline is no longer assured.
A break below September’s 94.7304 low would strengthen the case for another push towards 94, while oil, US yields and Friday’s employment report could quickly put 95.50 back in play.
Our currency coverage draws on live market data, official economic releases and published bank research.
