MUFG’s Michael Wan sees a detailed US-India interim trade agreement, including tariff cuts and exemptions, as positive for India’s external position. He sees the possibility of a short-term break for USD/INR below 90 in the coming months, but expects only a shallow recovery in INR. MUFG forecasts USD/INR to be 89.50 in the first quarter of 2026, rising to 93.00 by the end of the year on the back of FDI repatriation and wider deficits.

Tariff reductions facilitate, but there are benefits later

“USD/INR: The United States and India have provided more details on the interim trade agreement. Overall, we believe it is positive and forecast USD/INR to trade at 89.50 by March 2026 and 93.00 by December 2026.”

“Overall, we still think there is a good chance USD/INR breaks below the 90 level in the next few months, but it will likely be a shallow recovery.”

“89.50 in Q1 2026”

“Over time, we continue to see the USD/INR rate increase to 93.00 by Q4 2026, driven by continued FDI repatriation and import needs amid a larger current account deficit.”

“Overall we view the details as positive, despite possible political opposition in India over some agricultural concessions.”

(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor.)