The Indian rupee, which has faced consistent pressure throughout 2025, is unlikely to experience any dramatic decline in the immediate future according to a recent analysis by Union Bank of India. The bank's assessment indicates that the currency's recent weakness has largely already manifested in the markets.
Current Rupee Performance and Key Factors
The rupee has already depreciated by approximately 4 percent this year and is currently trading within a narrow range. This constrained movement comes as the currency faces multiple headwinds, including sustained US dollar strength, significant capital outflows, and ongoing uncertainty surrounding the delayed initial phase of the India-US Bilateral Trade Agreement (BTA).
Recent trading sessions have seen the rupee hovering near record lows, with the currency briefly touching 89.4950 against the US dollar. This weakness coincides with substantial withdrawals by foreign institutional investors, who have pulled out over $14 billion from Indian markets since January, according to ANI reports.
Bank's Assessment and Future Projections
Union Bank of India's report stated clearly: "Given that the rupee has already weakened by roughly 4 percent this year, we do not expect significant further depreciation in the near term." The analysis pointed to some positive domestic factors that are helping counterbalance external pressures, including easing inflation and reforms related to the Goods and Services Tax (GST).
The bank anticipates the rupee will remain range-bound between 88.80 and 89.50 through December. Significant strengthening would require either sustained domestic equity inflows or "tangible progress" on the India-US trade agreement, either of which could potentially push the currency toward 88.50 per dollar.
Potential Scenarios and Market Resistance
The bank outlined a more optimistic scenario where the rupee could strengthen meaningfully if multiple positive factors converge. This would require finalization of the trade pact alongside a Reserve Bank of India rate cut, improved sentiment among foreign institutional investors, and the anticipated start of the US Federal Reserve's easing cycle.
However, any bearish movement is expected to encounter strong resistance near the 89.50 level. A breach of this threshold could potentially open the door for the rupee to slide toward 89.90 against the US dollar.
In recent trading, the rupee settled at 89.45 on Friday, declining by 9 paise as market sentiment was dampened by a stronger US dollar, firmer crude oil prices, and weak equity performance. Traders maintained a cautious approach ahead of GDP data release, which later revealed the economy grew by 8.2 percent - marking the highest growth rate in six quarters.
Forex analysts quoted by PTI indicated that month-end dollar demand and continued capital outflows are keeping the rupee under pressure, even as the USD-INR pair encounters resistance at 89.70 and finds support at 88.80.
The rupee closed at 89.4575 in the latest session, remaining just below its record low of 89.49 reached a week earlier. Markets are now closely monitoring geopolitical developments, US tariff policies, and progress on the India-US trade agreement for fresh directional cues.
