The USD vs INR currency pair has been in focus throughout 2025, and for most of the year, the trend has not favored the Indian Rupee (INR). Even though the rupee has seen short-term recoveries, experts believe it may continue to remain the weakest Asian currency in FY26.
So, why is the Indian rupee weak? And why are economists not very optimistic about its recovery next year? Let’s break it down in simple terms.
Short-Term Relief: RBI Steps In to Support INR
Earlier this week, the Indian rupee hit a record low against the US dollar. In response, the Reserve Bank of India stepped in and sold large amounts of US dollars in the market.
This move helped the rupee recover sharply, rising nearly 1% in a single session to around 90.09 per dollar. It was the biggest one-day gain in several months.
However, currency experts warn that this relief may not last long. RBI intervention can slow down the fall, but it cannot permanently strengthen the rupee if the underlying problems remain.
Why Is the Indian Rupee So Weak?
According to Anindya Banerjee from Kotak Securities, the rupee is under pressure due to three major reasons: negative sentiment, foreign money going out, and global economic factors.
Let’s understand each one.
1. India–US Trade Tensions Are Hurting INR
One of the biggest reasons for INR weakness is uncertainty around the India–US trade deal.
The US has imposed high tariffs—up to 50%—on some Indian exports. These tariffs started during the Donald Trump administration and continue to affect Indian companies doing business in the US.
Because no final trade agreement has been reached yet, investors are nervous. This uncertainty hurts confidence in the Indian economy and weakens the USD vs. INR exchange rate.
2. Foreign Investors Are Pulling Money Out of India
Another major reason for rupee weakness is FII outflows (foreign institutional investors selling Indian assets).
FIIs have been selling Indian stocks since July 2025
Nearly USD 2.7 billion was withdrawn in early December alone
Higher US interest rates are attracting money back to America
When foreign investors sell Indian assets, they convert rupees into dollars, which pushes USD vs INR higher and makes the rupee weaker.
This creates a cycle:
Weak rupee → More FII selling → Even weaker rupee.
3. Strong US Dollar Is Pressuring All Currencies
Globally, the US dollar is strong due to higher interest rates and a stable US economy. Most Asian currencies are under pressure, but the Indian rupee has fallen more than others, like the Indonesian rupiah or Philippine peso.
This is because India is facing both:
Global Dollar strength
Country-specific issues like trade tariffs
As a result, USD vs INR remains tilted in favor of the US dollar.
Can a Trade Deal Save the Indian Rupee in FY26?
According to Sandeep Pandey of Basav Capital, the biggest reason behind the rupee’s fall is foreign investor selling caused by trade uncertainty.
While talks between India and the US are ongoing, most experts believe a final deal may only come by early 2026. Even then, its benefits will take time to show.
This means the Indian rupee is likely to stay volatile throughout FY26.
Technical View: USD vs INR Still Trending Up
From a chart perspective, the outlook for USD vs INR does not look encouraging for the rupee.
According to Ponmudi R of Enrich Money, the long-term trend still favors a stronger dollar.
Important Levels to Watch
90.00: Key psychological support
91.25: Immediate resistance
94–96: Possible target if trade tensions increase
As long as USD vs INR stays above major support levels, the rupee is unlikely to strengthen meaningfully.
Will INR Remain the Weakest Asian Currency in FY26?
Most experts believe the answer is yes.
The RBI can prevent sudden crashes, but it cannot stop long-term weakness caused by:
Foreign money outflows
Trade uncertainty
Strong US Dollar
In fact, policymakers may allow some rupee weakness to support Indian exports.
Conclusion: USD vs INR Outlook for FY26
To sum it up, the USD vs INR outlook for FY26 remains challenging. Despite short-term recoveries, the Indian rupee lacks strong reasons for a lasting comeback.
Until India secures a clear trade deal with the US and foreign investors return, INR may continue to struggle. For now, USD vs INR, Indian Rupee weakness,