Emkay noted that the dollar’s recent 1% rise was largely driven by temporary factors such as global trade uncertainties and ambiguous signals on US interest rates.
Over the past year, however, the greenback has weakened by about 4.8% against major currencies.With benchmark US 10-year Treasury yields slipping below 4%, markets seem to have already priced in potential rate cuts, suggesting limited upside for the dollar from here.
How India’s external factors are shiftingThe rupee, which touched ₹88.80 per US dollar in early October before recovering to ₹87.70 later in the month, has been under pressure since late 2024 due to a widening trade deficit and sustained foreign institutional investor (FII) outflows.
Emkay said recent positive FII inflows could help steady the currency in the coming weeks.
India’s merchandise trade deficit rose to a 13-month high of $32.15 billion in September, led by higher imports of gold, silver, fertilizers, and electronics. Exports have remained subdued, partly due to higher US tariffs on sectors like textiles and gems and jewellery.
What lies ahead
For the first half of FY26, the trade deficit stood at $154.98 billion. Emkay expects the rupee to appreciate modestly towards ₹87.20–₹87.30 if equity inflows continue. It also advised corporates to hedge all near-term receivables and payables amid external trade and rate volatility.
