Synopsis: Despite breaching the psychological ₹90 per USD mark, economists say the rupee is not fundamentally weak. According to SBI Research, the currency is likely to recover once the Indo-US trade deal is finalised—expected before March 2026. Geopolitical developments, Russian oil supply shifts, and US tariff actions continue to shape INR volatility.
Rupee Breaches ₹90: SBI Says Currency Not Weak, Likely to Recover by 2026
New Delhi: A sliding rupee is not necessarily a weak rupee even as it crosses the symbolic barrier of ₹90 per US dollar, according to a new report from the SBI Economic Research Department.
The report adds that the rupee could strengthen once the long-awaited Indo-US trade deal is completed—likely before March 2026.
The update comes ahead of Russian President Vladimir Putin’s visit to India this week for a summit with Prime Minister Narendra Modi. The meeting aims to boost cooperation in energy, defence, and economic partnerships, as Russia looks to secure oil sales amid tightening Western sanctions.
Russian Oil Imports Expected to Decline
The report notes a significant shift in India’s crude oil dynamics:
- US sanctions have tightened on Russian oil supplies
- India’s imports of discounted Russian crude are beginning to drop
- This has put short-term pressure on foreign exchange demand
“Lingering uncertainty over the Indo-US trade deal is keeping sentiments fragile,” SBI Research stated.
However, analysts remain optimistic that the deal will be finalised before March 2026, stabilising market confidence.
INR Depreciates 5.5% Since April 2025
Since April 2, 2025, when the US imposed sweeping global tariff hikes, the rupee has:
- Depreciated 5.5% against the US dollar
- Shown brief periods of appreciation due to optimism over trade negotiations
- Become the most depreciated major currency—though not the most volatile
The ability of Indian market participants to supply USD has reduced sharply, the report notes, making the RBI the supplier of last resort.
However, the RBI has deliberately avoided aggressive intervention, consistent with its policy of not defending any fixed exchange rate level.
Why Volatility Increased After ₹90 Breach
Once the rupee crossed ₹90/USD, several exotic derivative options—including barrier options—were automatically triggered.
This:
- Amplified market volatility
- Accelerated the pace of rupee depreciation
- Increased speculative pressure
Should RBI Cut Rates to Protect the Rupee?
With the Monetary Policy Committee (MPC) preparing for its next meeting, speculation has arisen over whether a rate cut could support the rupee.
However, SBI warns:
- A rate cut now may appear as a knee-jerk attempt to defend the rupee
- Such a move could harm markets and economic sentiment
- The currency remains fundamentally resilient due to domestic economic strength
The report argues that India’s macro fundamentals remain solid, and the rupee’s weakness is more a reflection of temporary global uncertainty than any structural issue.
📌 Key Takeaway
Despite crossing ₹90/USD, the rupee is not fundamentally weak. Its decline reflects global pressures such as US tariffs, Russian oil disruptions and trade uncertainty. SBI expects a recovery once the Indo-US trade deal concludes—likely before March 2026—restoring market stability and easing volatility.
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