NEW DELHI, India — Heightened volatility in global currency markets amid continued weakness in the U.S. dollar could support foreign institutional investor inflows into India, as the rupee shows signs of relative stability, according to a report released Tuesday.
The report by Emkay Wealth Management Limited said the decline in the dollar against major global currencies has been driven by expectations of further interest rate cuts by the U.S. Federal Reserve, along with ongoing geopolitical developments.
Market participants cited in the report said the Fed’s accommodative stance and expectations of additional rate cuts have contributed to sustained pressure on the dollar.
Against this backdrop, the Indian rupee “appears to have found relative stability around Rs 90 against the U.S. dollar,” with intermittent two-way volatility. The report said market estimates suggest the currency could consolidate near current levels in the near term.
“India’s status as a net importer continues to weigh on the rupee from a trade perspective; however, improving prospects for foreign investment inflows could provide some support,” the wealth management firm said.
Foreign institutional investors have been net sellers of Indian equities for roughly 18 months, leading to more attractive valuations across sectors. Analysts said deeper rate cuts in the U.S. could compress dollar yields and revive investor interest in emerging markets such as India.
“A softer U.S. dollar, coupled with potential capital reallocation towards emerging markets, creates both opportunities and risks for investors. For India, sustained foreign inflows, supported by stable macro fundamentals, could help the rupee maintain its current range despite global volatility,” said Parag Morey, Head of Sales, Emkay Wealth Management.
The Dollar Index has fallen nearly 9 percent to around 98.60 since early 2025, the report noted.
Currency experts also pointed to growing investor skepticism toward the dollar, partly driven by speculation about a potential change in U.S. Federal Reserve leadership by mid-2026. Expectations that a new Fed chair could align monetary policy more closely with executive priorities have reinforced assumptions of prolonged low interest rates, which may further weaken the dollar against major global currencies.
However, the firm cautioned that prudent hedging strategies remain important, as disruptions to shipping lanes or oil flows could trigger short-term spikes in crude prices and temporary flights to the dollar. (Source: IANS)
