INR at 98 or 86 vs USD? Rupee logs strongest recovery since 2020; what next?

USD vs INR: The rupee staged a strong recovery on Thursday. It gained as much as 176 paise against the US dollar in intraday trade. This marks its biggest single-day rise since March 2020.

The rebound comes after a steep fall earlier this week. The rupee had touched a record low of Rs 95.21 per dollar. That level had raised concerns over currency stability.

Even after today’s recovery, the broader trend remains weak. The rupee has declined more than 4 per cent so far this year. It remains among the weakest currencies globally. At the time of writing, it was trading near Rs 93.24 per dollar, as per data from Morningstar.

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Dollar gains after Trump’s remarks

Global cues remained volatile. The US dollar strengthened sharply after comments by Donald Trump. The dollar index moved above the key 100 mark.

In his speech, Trump signalled further escalation in the US-Iran conflict. He said the US would hit Iran “extremely hard” over the next two to three weeks. This came even as he hinted at nearing core objectives in the conflict.

The remarks increased uncertainty in global markets. Investors moved towards safe-haven assets like the dollar. This put pressure on emerging market currencies, including the rupee.

RBI tightens derivatives rules

The Reserve Bank of India (RBI) stepped in with fresh measures on April 1. The action followed a review of evolving market conditions.

As per RBI, banks’ net open positions have been capped at $100 million. This aims to limit excessive risk-taking. The central bank has also barred banks from offering non-deliverable derivative contracts in the rupee. This applies to both resident and non-resident users.

Further, rebooking of cancelled forex derivative contracts is not allowed. Banks may also seek additional documents from users to ensure compliance.

The steps are aimed at curbing speculation. They also seek to bring stability to the currency market. The action comes after the rupee breached the key Rs 95 per dollar level earlier this week.

Outlook mixed amid global risks

Currency outlook remains divided across global institutions. Bernstein expects the rupee at 98 per dollar in 2026. Societe Generale sees it around 96.

For the medium term, Bank of America (BofA) projects the rupee at 86 per dollar. ING Bank estimates around 87 for 2027–28.

The wide gap in forecasts reflects uncertainty. Global growth trends, dollar movement, and geopolitical risks remain key factors. The rupee is likely to stay volatile in the near term.

Expert view: volatility likely to persist

Manoj Kumar Jain, Director and Head of Commodity and Currency Research at Prithvi Finmart Pvt Ltd, said the dollar index remained volatile and settled at 99.39 on Wednesday, down 0.30 per cent. He added that USD-INR April futures closed slightly weaker at 95.0150 on NSE.

He noted that the dollar index is seeing sharp swings. This is due to hopes of de-escalation in the Iran conflict, recovery in global equities, and profit booking in bond markets. Softening crude prices have also capped gains in the dollar.

However, he cautioned that any adverse remarks from Donald Trump could support the dollar at lower levels. He expects the dollar index to remain volatile in the range of 98.25–101.85 this week.

On the rupee, Jain said the currency remains under pressure. It slipped below the 95 mark for the first time amid West Asia tensions. He highlighted heavy selling in domestic equities and record FPI outflows as key negatives. High crude prices have also weighed on the rupee.

He expects the rupee to remain volatile. The USD-INR pair may trade in the range of 92.80–96.60 this week.

On technicals, Jain said the pair is trading above key support of 93.90. RSI is above 60, while MACD shows a positive crossover. However, the pair is in an overbought zone.

He sees support at 93.90–93.40 and resistance at 95.50–95.95. He advises waiting for corrective dips before initiating fresh long positions.