The rupee is maintaining a cautious stance. Deferred talks between India and the US over the finalization of an interim trade pact is weighing on sentiment in the currency market.
Although the development seems positive for the currency, analysts have added that it has created an environment of policy instability.
The currency ended Monday’s trade at 90.88/ $ level, up 0.1% from its Friday close. Last week, the currency was swinging close to the psychologically important 91-level mark against the US dollar.
It is important to note that the Indian rupee has mostly remained range-bound for most of this month.
So what is the outlook for the currency?
“The 90.60–90.80 zone should act as strong support for USD/INR. As long as this range holds, the pair may gradually move higher toward the 91.20–91.50 region,” CR Forex Advisors MD Amit Pabari said, commenting on the near-term outlook for the currency.
He added that while the tariff headline appears marginally positive, the broader environment of uncertainty, firm dollar conditions, and elevated oil prices keeps the rupee on a cautious footing.
Factors weighing on the rupee
1.Policy instability: Pabari said that despite the lower tariff rate of 15% offering relief to the currency, policy instability remains the major issue. “The tariff framework has now changed twice in a very short span, complicating planning for exporters and policymakers. India has even delayed sending a trade delegation to Washington amid the lack of clarity,” Pabari said.
He added that when uncertainty rises, markets tend to shift into a “risk-off” mode. In such phases, capital flows slow toward emerging markets (like India). That dynamic puts pressure on the currency, gradually pulling the rupee lower through the session.
2. Maturity of NDFs: RBI’s reliance on the non-deliverable forward (NDF) market to manage currency volatility is coming into focus, Pabari added. The analyst said that as per some bankers, contracts worth at least $7 billion are set to mature this week, and additional maturities are lined up for the coming week.
“Unless these positions are rolled over, the unwinding process could create additional dollar demand in the spot market, thereby exerting further pressure on the rupee,” he added.
3. Geopolitical uncertainties: He noted that the currency ended on a weaker note yesterday, compared to its opening of 90.76, amid rising Brent crude prices due to geopolitical tensions between the US and Iran.
“Brent crude has climbed back toward $71 per barrel on concerns over potential U.S.–Iran tensions disrupting supply. For India, as a major oil importer, higher crude prices increase the import bill and widen the trade deficit, which structurally weighs on the rupee,” Pabari noted.
The analyst noted that as a result of these combined factors, the domestic currency gave up its early gains and closed weaker near 90.90.
