After a bruising 2025, can India’s rupee find its footing next year?

Dear reader, as 2025, a year of global tumult and volatility, rolls by, Mint's reporters and columnists look around the corner on what is coming in 2026—to help you know what to expect and prepare for it. Tell us what you think at [email protected]. Mumbai: After plummeting over 6% in 2025 and breaching the psychologically-important 90-per-dollar mark, the Indian rupee is heading into 2026 carrying the weight of weak capital flows, global trade uncertainty and shifting central bank strategy.Yet, beneath the headline depreciation, economists and market participants said the outlook for the currency next year is far from one-way depreciation and hinges crucially on how the external sector evolves, especially India's trade deal with the US.At the heart of the debate is whether this year's weakness marks the start of a more prolonged downcycle or a painful, but necessary adjustment.“Typically, the rupee needs to depreciate to the extent of the interest rate differential between the US and India, but the reality is that the external front has been hit hard by US tariffs," Neeraj Gambhir, executive firector at Axis Bank said.

"Therefore, the outlook for next year is significantly dependent on the outcome of tariff discussions.”In an optimistic scenario, clarity on tariffs between India and the US by early 2026 could help reverse export losses, draw back equity investors, and lift sentiment around India.“If all these things materialize, you will potentially end up seeing either no depreciation or a very mild depreciation in the rupee next year,” Gambhir said, adding that the currency could hover around current levels of 90-91 to the dollar in such a case.The pessimistic scenario is less forgiving. If trade negotiations