Foreign exchange analysts predict USD/INR easing towards 94 as RBI inflows steady the Rupee, before oil, yields and Dollar demand lift the pair back towards 96.
The US Dollar to Indian Rupee (USD/INR) exchange rate traded around 95.38 on Wednesday, recovering modestly from Tuesday’s 95.20 close but remaining well below the late-July levels above 96.5.
The pair has spent most of August trapped between roughly 94.84 and 96.00, with increasingly forceful Reserve Bank of India measures containing Rupee weakness while lower oil prices have recently provided some welcome breathing room.
FX analysts at MUFG think that support can carry the Rupee further over the coming months, although their forecast is very deliberately not a straight-line appreciation story.
“We have shifted our USD/INR forecast profile higher, but still directionally expect INR to strengthen in 2H 2026,” the bank said.
“With our new profile, we now expect USD/INR to trade between 94.000-95.000 over the next 3-6 months, before rebounding over the medium-term towards 96.000.”
MUFG’s published quarterly profile 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 makes the 94 handle the near-term destination, rather than the beginning of a lasting structural Rupee rally.
USD/INR has fallen sharply from above 96.5 in late July, while the 20-day moving average has also started turning lower as the pair consolidates in the mid-95s.
RBI’s Bigger FX Buffer Changes the Downside Risk
MUFG’s original concern was that the RBI’s extraordinary measures to attract foreign-currency deposits were having much less impact on spot USD/INR than anticipated.
“The more important factor for INR is however local in nature, and of particular consequence the much smaller than expected positive FX impact from RBI’s FX measures so far,” the bank said in its August outlook.
MUFG said the central bank now expects at least $80bn from its foreign-currency mobilisation measures, giving India a considerably larger external buffer.
Reuters subsequently reported that nearly $73bn had flowed into India between 8 June and 21 August, largely through the zero-cost hedging facility attached to overseas foreign-currency deposits. India’s FX reserves had already risen to $716.9bn, their highest in around six months.
As we noted in our previous MUFG USD/INR forecast, the significance is less about the RBI forcing the Rupee dramatically higher and more about removing the threat of a disorderly slide.
MUFG puts it similarly. “Moving forward, our expectation is that these FX measures should still help INR over time, and at the very least reduce some left tail risks.”
Its more recent analysis says the RBI is likely to continue prioritising “orderly currency movements rather than outright appreciation”.
That distinction helps explain why USD/INR can grind towards 94 without MUFG expecting a much larger Rupee rally afterwards.
Oil Has Finally Started Helping the Rupee
The external environment has also become friendlier over the past few sessions.
The Indian Rupee rose to a more than one-week high on Tuesday as Brent crude fell more than 3% to around $89.20 a barrel, with USD/INR closing near 95.41 in the domestic market. Reuters reported that RBI intervention had kept the currency unusually stable through the preceding sessions.
That matters particularly for India, which imports close to 90% of its crude requirements and therefore tends to suffer quickly when the oil bill rises.
MUFG explicitly incorporated the earlier oil spike into its forecast revision.
“We think the impact of these measures have nonetheless been offset by other dollar buying needs in July including hedging activity ahead of anticipated IPOs, RBI potentially reducing some of its net short dollar forward position, together with a less conducive global environment.”
The bank also stressed that higher US yields had moved beyond its earlier assumptions.
Those two pressures explain why the move towards 94 has been slow rather than spectacular.
Short-Term USD/INR Outlook: What Could Derail the Move to 94?
MUFG noted last week that the 10-year Treasury yield had returned towards 4.7% and the 30-year towards 5.24%, levels which tighten financial conditions and make higher-yielding Dollar assets more competitive with emerging-market carry trades.
Its latest Asia FX Weekly also flags US PCE inflation and Jackson Hole as important for Treasury yields, the Dollar and Asian currencies.
Another jump in crude prices would be just as uncomfortable, particularly if renewed Middle East disruption once again lifts India’s import bill.
For the moment, however, the flow picture is working in the Rupee’s favour.
RBI intervention has repeatedly prevented USD/INR from establishing itself above 96, foreign-currency mobilisation has strengthened the central bank’s ammunition and cheaper oil has removed one of the largest immediate headwinds.
There is even a mildly hawkish rates angle.
MUFG now expects the RBI’s next move to be higher, forecasting 50 basis points of tightening beginning in December after the August MPC minutes proved firmer than the original policy announcement.
We previously examined the same forecast path in our August MUFG Rupee outlook, when USD/INR was only beginning to test the effectiveness of those RBI measures.
Three weeks later, the central bank has considerably more evidence that its buffer is working.
MUFG’s forecast still contains an important sting for Rupee bulls: 94 is a near-term target, not a permanent destination.
Once the current inflow wave fades, and if oil or US yields regain momentum, the bank expects USD/INR to turn higher again towards 96 during 2027.
