CareEdge Ratings: Rupee May Hold at 89–90/USD by FY27 on Weaker Dollar, Manageable CAD
New Delhi, February 19: According to a report by CareEdge Ratings, the Indian rupee is expected to remain in the range of 89–90 against the US dollar by the end of fiscal year 2027 (FY27), supported by a weaker dollar and a manageable current account deficit (CAD).
The report noted that following a trade deal with the United States and progress on a Free Trade Agreement (FTA) with the European Union, the USD/INR pair recovered from its recent low of 92 to around 90.6. This rebound reflects improving sentiment and reduced pressure on the domestic currency.
“We maintain our forecast of USD/INR at 89–90 by the end of FY27,” the report stated.
Despite the recent recovery, the rupee remains about 0.5 percent weaker against the dollar compared to its level a month ago, indicating that external pressures persist even as the currency regains some ground.
The report added that easing trade uncertainties are likely to improve foreign investment inflows. Rising investor confidence and stronger capital inflows are expected to enhance currency stability in the coming period.
It further observed that stronger inflows and reduced volatility could allow the Reserve Bank of India (RBI) to scale back its foreign exchange interventions. In recent months, the central bank has stepped up interventions to manage currency fluctuations and ensure stability in the forex market.
Meanwhile, the dollar index has remained weak amid growing expectations of rate cuts by the Federal Reserve. Inflation in the United States fell sharply to 2.4 percent in January from 2.7 percent over the previous two months, contributing to the dollar’s softness.
A softer dollar environment generally benefits emerging market currencies, including the Indian rupee, by easing depreciation pressures and improving overall currency stability.
Based on these factors, the report reaffirmed its projection that the USD/INR exchange rate will remain in the 89–90 range by the end of FY27.
