Rupee could strengthen in near-term on back of India-US trade deal

Analyst says the 89.80–90.00 zone has now emerged as a strong support base for the rupee against the US dollar.

The rupee could find short-term support in the wake of India and the US reaching a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade, with market experts seeing the Indian currency strengthening towards the 89 level against the US dollar.

The Indian unit (INR) has depreciated about 5 per cent against the USD since August 2025, when US slapped punitive tariffs on Indian goods.

Elara Capital’s economists, in a report, said in near term, they expectUSD/INR reversing direction and moving towards 88.5 -89 in the upcoming weeks with the FPI flows reversing course.

“The REER (real effective exchange rate)-based valuation is at the lowest since CY2014 indicating the USD/INR is undervalued. Even though DXY trades with an upside bias, USD/INR is likely to stay resilient as sentiment improves due to the trade deal,” per the report.

Madhavi Arora, Chief Economist, Emkay Global Financial Services, observed that the rupee has borne a large part of the tariff overhang (worst Emerging Market Asian FX FYTD26), with a negative feedback loop hammering rates markets, equities and eventually policymaking.

“Some of this noise could subside and possibly lead to reversal of capital inflows. However, we note a chunk of capital outflows has also been through FDI repatriation (largely PE exits) and not just FPI outflows,” she said.

Nomura, in a report, said the positivity from US-India trade deal announcement is likely to provide some short-lived support for INR. RBI FX reserve accumulation, US product purchases and global risk markets will likely continue to weigh on INR.

Amit Pabari, MD, CR Forex Advisors, assessed that from a technical standpoint, the 89.80–90.00 zone has now emerged as a strong support base.

Published on February 8, 2026