The Indian rupee remained near its all-time low this week, even as odds of a trade deal between the United States and India rose. The USD/INR pair was trading at 88.70 today, a few points below the record high of 88.87. It has jumped by 5.90% from its lowest level this year.
Analysts are bullish on the Indian rupee
Some analysts are highly bullish on the Indian rupee as odds of a sustained trade deal between the US and India rose. In a statement on Tuesday, Donald Trump confirmed that the two sides would reach a fair trade deal with the fifth biggest economy in the world soon.
As a result, analysts at ING Bank predicted that the relatively cheap rupee will stage a strong rebound. The bank sees the USD/INR exchange rate moving from the current 88.90 to 87 at the end of 2026, a 2% increase from the current level.
ING believes that the catalyst will be the deal with the US and the fact that it has become a highly undervalued currency. It has become the second-worst-performing currency in Asia this year after the Indonesian rupiah. The bank said:
“India remains the standout among high-yielders: fundamentals are solid, fiscal risks are contained, and supply chain diversification continues to attract investment.”
India and the United States are going through a rough patch because of Donald Trump’s tariff policy. The US has imposed a 50% tariff on Indian goods. A part of the tariff is based on the reciprocal levy, while the rest is because India purchases Russian oil.
On top of this, the US has added the H1-B visa fee from below $300 to $100,000, a move aimed at preventing more workers from coming to the United States. While the policy applies to all countries, India is at a significant risk as it accounts for 70% of the recipients.
Therefore, a deal between the two countries may help to boost the performance of the Indian rupee in the near term.
The other potential catalyst for the Indian rupee is the carry trade opportunity, where investors borrow from a low-yielding country to a higher-yielding one.
A good example of this is the fact that Indian bond yields are soaring, which is attracting American foreign investors. Data shows that global funds bought $631 million (55.5 billion rupees) of government debt last week, up from the previous 1.21 billion.
USD/INR technical analysis
The daily timeframe chart shows that the USD/INR exchange rate has been in an uptrend in the past few months and is now hovering near its all-time high.
It remains above all moving averages, a sign that bulls remain in control. However, the pair has also formed a double-top pattern at 88.87 and a neckline at 87.61.
Therefore, the pair will likely have a bearish breakout, potentially to the psychological level at 88 in the near term.
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