Patrick Law, Head of Asia Pacific Fixed Income, Currencies and Commodities at Bank of America, outlined the key forces that will shape the Indian rupee in 2026. He said the currency’s direction depends on the US Federal Reserve’s policy path, the return of capital inflows, and the outcome of a possible trade deal with the US.

Law described 2025 as a "write-off kind of year" for India after several years of strong macro performance, noting that the rupee has been one of the top depreciators in the emerging market pack. He identified three drivers for the rupee: the interest rate differential with the US, the balance of payments, and any progress on a US–India trade deal.

India’s external position, he said, has weakened. The current account has moved from a small surplus to a deficit, and

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