BENGALURU, Feb 4 (Reuters) - The Indian rupee is forecast to remain in a narrow range over the next few months, having clawed back only a fraction of the losses it has racked up against the dollar since early 2025, a Reuters poll of FX strategists found.
The latest monthly poll, taken after U.S. President Donald Trump on Monday announced a trade pact with India to slash U.S. tariffs on Indian goods to 18% from 50%, suggests strategists expect foreign capital inflows are likely to remain sluggish.
The rupee, which is partly managed by the central bank, rose 1.36% against the dollar on Tuesday, its biggest one-day gain since December 2018.
But it was forecast to trade roughly around current levels, at 90.19 per dollar by end-April 2026, and then be at 90.63 by end-July, according to the median view of 27 strategists polled between February 3-4.
The currency, down about 0.46% for the year, was expected to trade a bit weaker at 91 in a year, according to the median forecast from the poll.
"It would be unreasonable to expect the rupee to unwind all of its depreciation that has happened over the past one year or so," said Dhiraj Nim, FX strategist at ANZ.
"There have been multiple reasons for equity outflows, not just U.S.-India trade tensions, which include concerns over equity market overvaluation, a lack of India's participation in the global AI trade rally, and the earnings stress domestically...only some of these factors have eased, not all."
Concerns about still-lofty valuations after years of stock market outperformance as well as weak earnings are likely to keep foreign investors cautious. These pressures have contributed to the rupee striking successive record lows over the past year even while the dollar has mostly weakened.
India's benchmark equity indices were largely flat on Wednesday following their strongest gains in nine months on Tuesday after the trade deal announcement.
"While foreign equity portfolio inflows will get a near-term pop, we don't think it will be a sustained improvement over 2026...foreigners will likely continue to exit and take profits on their investments in India, and correspondingly put pressure on INR to weaken," noted Michael Wan, senior currency analyst at MUFG.
"We think the RBI has an incentive to buy dollars given the sizeable net short forward position, and as such, there will be some natural floor to USD/INR if inflows improve over time," Wan added.
Sharper one-sided moves in the currency have so far been capped by the RBI's interventions in the foreign exchange market.
Most economists in a separate Reuters poll expect the RBI to keep its key interest rates on hold at least until the end of 2026.
Reporting by Pranoy Krishna; Polling by Susobhan Sarkar; Editing by Ross Finley and Sharon Singleton
Source: Reuters