The Indian rupee to rise higher amid dollar weakness, sparking fresh optimism for its 2025 trajectory as markets eye the Federal Reserve’s pivotal rate decision.
MUMBAI: The Indian rupee strengthened against the US dollar on Monday, September 16, 2025, buoyed by a softening greenback ahead of the Federal Reserve’s policy meeting, with traders anticipating a rate cut that could bolster the indian rupee rise 2025 forecast.
Why It Matters for South Asia
In a region heavily reliant on remittances and trade balances, a stronger Indian rupee could ease import costs for India while influencing currency dynamics across South Asia, potentially stabilising exchange rates in neighbouring economies like Pakistan and Bangladesh through enhanced regional trade flows.
Indian Rupee to Rise 2025 Forecast Gains Momentum
The Indian rupee opened firmer on Monday, September 16, 2025, with one-month non-deliverable forwards pointing to an initial range of 88.12-88.14 per US dollar, up from the previous close of 88.21. This modest recovery followed a record low of 88.4550 hit on Friday, September 13, 2025, amid broader Asian currency gains and sustained risk appetite in global markets.
Cross-verified reports from Moneycontrol and FXStreet confirm the rupee’s upward tick, attributing it to a dip in the dollar index to 97.26. The currency’s rebound reflects lighter positioning after the recent trough, with two-way flows evident in offshore markets. A currency trader at a private sector bank noted, “It’s just a modest pullback (in dollar/rupee). However, the tide does look a bit better for the rupee, though it hasn’t really turned in its favour yet.”
Market participants largely dismissed immediate fallout from a Bloomberg report on JPMorgan trimming weights of top bond issuers in its emerging markets index, expecting any rebalancing to unfold gradually. Meanwhile, Brent crude futures edged up 0.2 per cent to $67.6 per barrel, and the ten-year US Treasury yield held at 4.04 per cent, underscoring steady commodity and bond dynamics.
Foreign investors showed renewed interest, purchasing a net $115.8 million in Indian shares and $198.9 million in bonds on Thursday, September 12, 2025, according to National Securities Depository Limited data. This inflow aligns with positioning for potential Fed easing, which could further support the indian rupee rise 2025 forecast.
Fed Meeting Rupee Rise 2025 Implications
The spotlight remains on the US Federal Reserve’s two-day meeting concluding on Wednesday, September 18, 2025, where a 25-basis-point rate cut is widely anticipated. Investors have priced in an additional two cuts for October and December, totalling about 75 basis points of easing by year-end. A more dovish tone from the Fed could “squeeze dollar longs and hand the rupee the needed tailwind,” the aforementioned trader added.
This expectation ties directly into the Fed meeting rupee rise 2025 outlook, as lower US rates typically erode the dollar’s appeal, fostering appreciation in emerging market currencies like the rupee. Reports from Business Standard and The Economic Times corroborate the market’s cautious optimism, noting the rupee’s early trade gains at around 88.05-88.25 per dollar on Monday morning.
Onshore one-month forward premiums stood at 12 paise, with the one-month non-deliverable rupee forward at 88.28, indicating mild bullish sentiment. However, importer hedging amid tariff uncertainties could cap sharper gains in the near term.
Broader Indian Rupee Rise 2025 Forecast Landscape
Looking ahead, the indian rupee rise 2025 forecast varies among economists, influenced by US policy shifts and domestic factors. Bank of America Global Research recently revised its projection to 84 per US dollar by December 2025, up from a prior estimate of 87, citing improved global liquidity and Fed easing as key drivers. This bullish stance aligns with peers, potentially amplifying the Fed meeting rupee rise 2025 narrative.
MUFG Research echoes this optimism, forecasting USD/INR at 87.50 by end-2025, a slight strengthening from current levels, underpinned by anticipated Reserve Bank of India rate cuts to a terminal 5.50 per cent. Conversely, some analysts project mild depreciation; for instance, a Reuters poll of 14 strategists sees the rupee at 89-90 per dollar by year-end, factoring in potential US tariff hikes and capital outflows.
The Reserve Bank of India has not issued a specific forecast in recent press releases, but its interventions suspected in stabilizing the rupee post-Friday’s low verify underscore vigilance. According to the Ministry of Finance, ongoing monitoring of external sector developments remains a priority, though no direct commentary on 2025 projections was available as of Monday, September 16, 2025, at 11:45 AM.
These divergent views highlight the Indian rupee rise 2025 forecast’s sensitivity to geopolitical risks, including US-India trade frictions. A sustained dollar retreat could tilt probabilities towards appreciation, enhancing the Fed meeting rupee rise 2025 prospects.
Historical Context and Interventions
The rupee’s volatility in 2025 has been marked by US tariff threats and softening domestic growth, pushing it to lifetime lows earlier this month. The RBI’s repo rate stands at 6.25 per cent following 100 basis points of cuts year-to-date, with economists anticipating further easing if inflation moderates.
What’s Next for the Rupee
As the Fed’s decision looms, traders will parse Chair Jerome Powell’s remarks for clues on the pace of future cuts, which could decisively shape the indian rupee rise 2025 forecast. A dovish surprise might propel the currency towards 87.50 in the short term, while hawkish signals could reignite depreciation pressures.
In conclusion, with dollar dynamics in flux, the indian rupee rise 2025 forecast hinges on balanced global easing, offering South Asian markets a window for currency stabilisation.
Published in SouthAsianDesk, September 16th, 2025
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