Rupee could strengthen in near-term on back of India-US trade deal

Analyst says the 89.80–90.00 zone has now emerged as a strong support base for the rupee against the US dollar.

Market experts indicate the rupee, supported by a new trade agreement between India and the US, may strengthen toward 89 against the dollar in the near term. The framework for an interim trade deal is expected to bolster the currency’s resilience.

Since August 2025, when the US imposed tariffs on Indian exports, the rupee has weakened approximately 5% against the dollar.

Analysts at Elara Capital suggest the USD/INR pair could reverse its trajectory, potentially declining to 88.5–89 in coming weeks as foreign portfolio investment flows recover. They note that the rupee’s real effective exchange rate (REER) is undervalued at its lowest point since 2014, despite a stronger dollar index (DXY). Improved market sentiment following the trade agreement may further shield the rupee.

Madhavi Arora, Chief Economist at Emkay Global Financial Services, highlighted the rupee’s disproportionate decline among Asian emerging market currencies this fiscal year. She attributed this to the tariff impact, which disrupted equity markets, rates, and policymaking. While capital inflows may rebound, she noted significant outflows stemmed from foreign direct investment repatriation, particularly private equity exits.

Nomura analysts cautioned that enthusiasm from the trade deal might only offer temporary rupee relief. Persistent factors—including the Reserve Bank of India’s foreign exchange reserve accumulation, US import commitments, and global market risks—could continue weighing on the currency.

CR Forex Advisors’ MD Amit Pabari pointed to technical indicators positioning the 89.80–90.00 range as a robust support level for the rupee.

Published on February 8, 2026