The Indian rupee is forecast to trade in the Rs 90.40-91.20 per US dollar range, supported by equity inflows, a Union Bank report said. Long-term structural support from AI in services exports and high forex reserves will cushion the currency.
The Indian rupee is expected to trade in the range of Rs 90.40-91.20 per US dollar throughout the next week, supported by sustained equity inflows and improving structural factors, according to a report by Union Bank of India. The report highlighted that range from a technical standpoint and added that continued equity inflows could further strengthen the domestic currency.
Technical Analysis and Key Levels
"Sustained equity inflows could strengthen the INR toward Rs 90.10/USD, with Rs 90.40/USD acting as a key interim support. As India-US BTA is finalized; the threshold for the rupee has shifted meaningfully. Likely to face strong resistance near Rs 90.90/USD, a break above this zone could trigger a move toward Rs 91.20/USD," the report stated.
Structural Support from AI-Led Exports
The report also emphasised the role of Artificial Intelligence in shaping India's services export outlook, which could provide structural support to the rupee over the long term. "Artificial Intelligence is set to reshape India's services export landscape, with higher-value digital, cloud, and AI-led offerings potentially strengthening export competitiveness and supporting USD inflows -- a structural positive for the Rupee," the report noted.
Near-Term Risks in IT Sector
However, the report cautioned that near-term risks remain due to ongoing transitions in traditional IT outsourcing models. "Near-term transition risks in traditional IT outsourcing models could weigh on earnings sentiment and FPI flows, creating episodic volatility," it added.
Recent Performance and Underlying Strength
The Indian rupee maintained a stable trajectory during the previous week, trading consistently within a narrow range of Rs 90.60-Rs 90.70 per dollar. This stability was observed despite a widening trade deficit of USD 34.68 billion and persistent foreign institutional investor outflows.
The report attributed this stability to strong macroeconomic fundamentals and investor confidence in India's economic position.
The report also added that market participants remained confident in India's macroeconomic buffers, supported by record-high foreign exchange reserves of USD 725.73 billion, which helped cushion the rupee against external pressures.
Overall Outlook
So, the report outlined that while the rupee may face near-term volatility due to global and sector-specific developments, sustained capital inflows, strong services exports, and robust forex reserves are expected to provide support to the domestic currency in the coming weeks.
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