Indian Rupee Forecast: Trading Between 85.25 and 86.25 Against USD

Current Outlook for the Indian Rupee

According to a recent analysis by Bank of Baroda, the Indian rupee is projected to fluctuate between 85.25 and 86.25 against the US dollar in the upcoming period. The report cautions that geopolitical tensions and potential adjustments in US tariffs could pose risks to the rupee's stability.

The analysis states, "We anticipate the INR to trade within the 85.25-86.25/USD range in the near future. However, significant geopolitical escalations could impact this outlook."

As of June 2025, the rupee has experienced a 0.6% depreciation, following a 1.3% decline in May. The rupee faced considerable pressure during the second week of June, particularly after reports emerged regarding a conflict between Israel and Iran.

Prior to this, the rupee had been trading within a narrow band of 85.39 to 85.63 from June 2 to June 12. However, following news of Israel's military actions against Iran, the rupee dropped sharply by 0.6% on June 13, marking its largest single-day decline in a month. Although it has since stabilized, it continues to trade above the 86 per dollar threshold.

Global Currency Trends and Future Projections

The report further indicates that global currencies have appreciated in June 2025, largely due to a weakening US dollar. The dollar index (DXY) fell by 1.3%, influenced by US economic indicators, including inflation and labor market reports, which suggest that price pressures are manageable. However, labor market data has shown mixed results.

As a result of these developments, investors are increasingly anticipating a potential interest rate cut by the US Federal Reserve later this year, with the likelihood of a rate reduction in September 2025 rising to approximately 60%, up from 50% a month prior.

Despite the prevailing global uncertainties, the Indian rupee has largely maintained its stability, mirroring trends observed in other international currencies that experienced temporary declines but subsequently recovered. Looking ahead, the rupee may encounter some fluctuations due to global challenges and the impending conclusion of the US tariff pause.

Nonetheless, the report emphasizes that the Reserve Bank of India's robust foreign exchange reserves will play a crucial role in ensuring the smooth movement of the rupee.