In conversation with CNBC-TV18, Nim noted that once the psychologically key 90-per-dollar threshold was breached, several market participants booked existing positions, but fresh hedging demand has quickly resurfaced.
“Expectations about the USD/INR are a bit one-sided right now. Most people expect that the trade deal remains elusive, and the comments from the CEA do not indicate clarity that it is happening anytime in the near future,” he said.Structural weakness points to 91.50 — possibly much earlier
ANZ Research expects the rupee to continue weakening through the medium term, projecting the currency at 91.50 by the end of FY27. However, given the pace of the recent move, Nim warned that the market may not wait that long.
“As long as high tariffs remain part of India’s economic configuration, we are projecting the rupee at 91.50 by the end of next fiscal year. But given the kind of momentum we have seen, those levels could be attained much sooner than we are currently projecting,” he said.
The comment underscores growing concern among currency strategists that India’s trade posture — particularly elevated tariffs — is creating persistent structural pressure on the rupee.
In Nim’s view, even if intermittent bouts of appreciation occur, the longer-term trend remains tilted towards depreciation unless policy settings shift meaningfully.
Seasonality may offer short-lived relief in early 2026Despite the medium-term bearish bias, ANZ expects the rupee to show some strength early next year. Nim pointed to India’s recurring trade account surplus in the January–March quarter and fresh global portfolio allocations at the start of the calendar year, both of which typically lend support to the currency.
“We have put our Q1 forecast at 90, which is an appreciation from current levels. Seasonality could play out in Q1 of 2026,” he said. But he added a caveat: any recovery would be tactical, not structural.
“Fundamentally, we are looking at a weaker rupee in the medium term as long as tariffs remain in place.”
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FPI tax concerns unlikely to be addressed in budget
Another headwind for the rupee is foreign investor sentiment, which has been dampened not just by currency losses but also by India’s capital gains tax and withholding tax regime. Nim does not expect relief on this front anytime soon.
“If you look at the government’s tax situation overall, it’s not looking great. There is a bit of fiscal strain in the system, and the recent tax relief intended to support demand would have eaten into the government’s fiscal capacity,” he said. “I don’t think the upcoming budget will have space for much tax relaxation — let alone capital gains tax or withholding tax.”
Rupee path hinges on policy, not just markets
While near-term flows and seasonal factors may offer temporary reprieve, the rupee’s broader trajectory appears anchored to India’s tariff structure, fiscal room, and trade dynamics. If these structural elements remain unchanged, Nim believes the currency’s slide toward 91.50 — and perhaps beyond — is only a matter of time.
