After 5% Fall in 2025, Rupee Likely to Ease in 2026, Stabilise Near ₹92: SBI Funds

New Delhi | January 3,2026 After witnessing a sharp decline in 2025, the Indian rupee is expected to depreciate at a much slower pace in 2026 and stabilise around ₹92 per US dollar, according to SBI Funds Management’s 2026 Outlook. The rupee fell nearly 5% in 2025, marking its weakest performance since 2022. This decline came amid foreign fund outflows, global trade uncertainty, and elevated hedging demand, making the rupee an underperformer compared to most emerging-market currencies — even at a time when the US dollar weakened globally. However, the outlook for the currency appears relatively stable going forward. SBI Funds Management projects that the rupee will depreciate by only about 2% in FY27, with the exchange rate expected to hover close to ₹92 to the dollar. This indicates a significant slowdown in the pace of depreciation compared to the previous year. According to the report, several structural and global factors are expected to support the rupee in 2026. One key factor is India’s Current Account Deficit (CAD), which is projected to remain below 1% of GDP. This improvement is being driven by strong growth in services exports, particularly in sectors such as IT and professional services, along with subdued global crude oil prices, which help reduce import costs. On the global front, the outlook for the US dollar is another important support. SBI Funds Management expects the dollar to remain on a softening trajectory as the US Federal Reserve approaches the end of its easing cycle. Historically, such a phase has been favourable for emerging-market currencies, including the Indian rupee, as capital flows tend to stabilise and risk appetite improves. The report also suggests that while volatility may not disappear entirely, extreme pressure on the rupee is unlikely unless there is a major global shock. Improved macroeconomic fundamentals, controlled external deficits, and a more stable global monetary environment are expected to cushion the currency against sharp swings. In summary, while 2025 proved challenging for the rupee, 2026 is expected to bring relative stability rather than steep depreciation. With a projected exchange rate of around ₹92 per dollar and a much slower pace of decline, SBI Funds Management believes the rupee’s worst phase may already be behind it, provided global and domestic conditions remain broadly supportive. Rupee Seen Softening Gradually in 2026 After Sharp 2025 Slide: SBI Funds After a difficult year in 2025, the Indian rupee is expected to weaken at a slower and more controlled pace in 2026, settling around ₹92 against the US dollar, according to SBI Funds Management’s 2026 Outlook. The domestic currency declined by nearly 5% in 2025, making it the weakest year for the rupee since 2022. This fall was largely driven by foreign portfolio outflows, global trade-related uncertainty, and high hedging demand. As a result, the rupee underperformed most emerging-market currencies, even during a phase when the US dollar was losing strength globally. Looking ahead, SBI Funds Management expects the pressure on the rupee to ease considerably. The report estimates a depreciation of only about 2% in FY27, with the exchange rate likely to remain close to ₹92 per dollar. This marks a clear shift from the steep decline witnessed last year and signals improved currency stability. The relatively positive outlook is supported by multiple domestic and global factors. India’s current account deficit is expected to stay below 1% of GDP, helped by robust services exports and moderate crude oil prices, which limit the impact of import bills on the economy. These factors together strengthen India’s external position and reduce pressure on the rupee. Global conditions are also expected to work in India’s favour. The US dollar is projected to remain on a softening path as the US Federal Reserve moves closer to the end of its monetary easing cycle. Historically, such an environment has been supportive for emerging-market currencies, including the rupee, by improving capital flow stability and investor confidence. While some volatility may continue due to global developments, SBI Funds Management believes the likelihood of sharp or disruptive depreciation is low unless there is a major external shock. Strong macroeconomic fundamentals and a more balanced global monetary landscape are expected to act as buffers. Overall, after enduring significant stress in 2025, the rupee is expected to enter a phase of gradual and manageable movement in 2026, with stability around the ₹92 mark reflecting a more resilient currency outlook.