After 5% fall in 2025, rupee likely to see slower decline next year: SBI Funds

After a volatile 2025, when the Indian rupee fell nearly 5% against the US dollar , SBI Funds Management expects the currency to weaken only moderately in 2026, hovering around Rs 92 per dollar .

Last year’s sharp fall, the largest since 2022, was driven mainly by foreign fund outflows , trade uncertainty, and increased hedging demand, even as the US dollar weakened globally. Foreign portfolio investors (FPIs) sold around USD 18 billion in Indian equities, adding pressure on the currency.

Looking ahead, the rupee is likely to see a slower decline due to several factors: a current account deficit below 1% of GDP, strong services exports , lower crude oil prices, and inflation remaining near the RBI’s 4% target . Globally, a softening US dollar as the Federal Reserve nears the end of its easing cycle should support emerging-market currencies. Additional factors such as potential inclusion of Indian bonds in global indices and renewed foreign capital inflows may further ease pressure.

In short, while the rupee may remain slightly weaker than its current level, its decline is expected to moderate, providing a more stable outlook after last year’s volatility.