Rising oil costs test the RBI’s support for the rupee, with USD/INR forecasts ranging from MUFG’s 95.50 to BofA’s 98 for late 2026.
Bank of America expects the US Dollar to reach 98 Rupees by year-end, compared with Goldman Sachs’ three-month forecast of 96 and MUFG’s 95.50 for Q4.
The US Dollar to Rupee exchange rate (USD/INR) traded near 95.85 on Tuesday, little changed on the day but up around 1.5% since 4 September.
That leaves the Indian Rupee close to Goldman’s near-term forecast, while BofA anticipates further depreciation.
With Brent having topped $108 on Monday, we think India’s dollar demand for imported oil makes the weaker-rupee scenario harder to dismiss.
MUFG identifies a similar vulnerability in the rupee and Thai baht:
“THB and INR for instance appear vulnerable to the combination of elevated oil prices, rising US yields and reduced global carry appetite.”
Further ahead, BofA sees 99 at end-2027, while Goldman forecasts 97 at six and 12 months.
MUFG expects 96.00 in Q1 2027 and 96.50 in Q2.
Inflation strengthens the case for an RBI response
Monday’s Indian inflation release showed annual price growth rising to 4.82% in August from 4.45% in July, close to MUFG’s 4.8% expectation.
Ahead of the release, MUFG highlighted the supply pressures:
“Food inflation has been affected by an erratic monsoon, while the rise in global crude and domestic fuel costs is adding further upward pressure.”
MUFG’s case for tighter policy echoes Crédit Agricole’s earlier forecast of RBI rate rises.
“This reinforces our view that the combination of resilient growth and renewed inflationary pressure should ultimately favour tighter RBI policy, even as intervention helps contain near-term INR volatility,” MUFG wrote.
The bank says RBI dollar sales have already helped restrain rupee losses, but cautions:
“Continued RBI intervention should limit disorderly moves, although it is unlikely to prevent adjustment to persistent external pressures.”
A quiet session therefore offers limited reassurance if India’s oil bill keeps rising.
Our currency coverage draws on live market data, official economic releases and published bank research.
