USD vs INR: Rupee continues its falling streak. Can it plunge to 100/$ by end of FY26?

INR vs USD: The Indian rupee weakened sharply by 36 paise on Tuesday, crossing the 91-per-dollar level for the first time in intraday trade, led by continued foreign institutional investor (FII) outflows and uncertainty surrounding the India–US trade agreement.

Over the past 10 trading sessions, the currency has declined from 90 to 91 against the dollar, including a 1% drop in just the last five sessions.

“In the current setup, RBI’s sizeable short USD forward position ($63 bln as on end October, 2025) has shifted intervention away from the spot market. While this provided temporary stability earlier, it has reduced RBI’s willingness to sell dollars aggressively in spot, leaving the rupee more exposed to flow-driven pressure,” said Kunal Sodhani, Head Treasury, Shinhan Bank.

Why Indian Rupee falling?

FPIs have net sellers in Indian equities worth more than $18 billion so far in 2025, making India one of the worst-hit markets in terms of portfolio outflows.

Slowing earnings momentum, stretched valuations, and the absence of listed artificial intelligence-focused companies have already caused Indian equities to underperform most emerging-market peers this year.

Sentiment has also been dampened by the steepest US tariffs imposed on any Asian economy, as investors await the conclusion of trade talks between the two countries.

According to Barclays Plc, the Reserve Bank of India is unlikely to aggressively defend the currency in the current environment, instead prioritising economic growth.

That said, a softer rupee can support companies with significant overseas revenue exposure, especially technology exporters. An index tracking IT stocks has gained roughly 14% since the end of September, coinciding with the period of accelerated currency depreciation.

“A rupee slipped to record lower levels against major global currencies. Delay in the US-India trade ties and heavy FPI outflow from the domestic equity markets are pressurising the rupee. Record trade deficits and fresh trade tariffs of 50% on Indian goods imposed by Mexico are a reason for fresh fall in the rupee,” said Rahul Kalantri, VP Commodities at Mehta Equities Ltd.

Can it plunge to 100 per dollar?

According to Akshat Garg, Head of Research and Product at Choice Wealth, rupee reaching 100/$ by March 31, 2026, would be an extreme outcome, not the base case.

“The rupee is currently trading around ₹90.8–91.1 (Dec 16, 2025), implying that a move to ₹100 would require roughly a 10% depreciation in a relatively short period. Such a slide would need a ‘perfect storm’ — a sharp and sustained global dollar rally driven by surprise Fed tightening, large and persistent portfolio outflows from India, and adverse terms-of-trade shocks, particularly a meaningful spike in oil and import costs,” Garg explained.

On the other hand, V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said that normally when rupee depreciates the RBI will intervene to stabilise the currency by selling dollars. But in the recent episode of sharp depreciation, the RBI is not intervening and is allowing the Indian currency to depreciate.

“This can be a deliberate strategy to make India’s exports more competitive in the context of Trump tariffs, which have affected our exports. In the short-term, rupee is likely to trade in the range of 90-92. Since India’s trade deficit in November has declined to $24.53 billion from $41.68 billion in October, there is no room for alarm,” he added.

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.