The Indian rupee is expected to weaken further in the coming weeks, as subdued capital inflows, ongoing foreign selling and uncertainty around major trade negotiations keep pressure on the currency. Analysts say the trend may continue through the end of 2025, with both the forex and debt markets watching closely for shifts in investor behaviour.
Weakness Driven by Foreign Portfolio Investor Activity
Foreign portfolio investors (FPIs) have been reducing their exposure to Indian assets, particularly equities and bonds, contributing to downward pressure on the rupee. Persistent selling by FPIs makes the currency vulnerable, even as the US dollar softens on global cues.
Market participants note that continued outflows will likely influence both the rupee and the movement of government bond yields, with investors tracking how much debt the Reserve Bank of India (RBI) may buy to support market stability.
Record Lows and Trading Range Outlook
The rupee recently hit near record lows against the US dollar, reflecting broader weakness in capital flows and concerns over external demand. Analysts project the currency to fluctuate in a range as it balances between downside pressures and occasional interventions by the central bank.
Bonds and Economic Data in the Spotlight
With the currency under stress, debt markets are also drawing investor attention. Bond yields are expected to move in response to both foreign activity and RBI’s debt purchases, which aim to manage liquidity and smoothen yields. The behaviour of yields will be a key signal for markets in the near term.
Upcoming economic data releases — including inflation and manufacturing indicators — will also influence investor sentiment, potentially affecting both currency trends and portfolio allocation decisions.
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