The Indian rupee, the worst-performing currency in Asia in 2025, faces a challenging start to 2026. Analysts at Nomura and S&P Global Market Intelligence forecast that the rupee will decline to 92 per dollar by the end of March. Further movement of the currency will largely depend on the resolution of a trade agreement between India and the United States, which has yet to be finalized.

Pressure on the rupee is exacerbated by a persistent outflow of foreign investments. Negotiations between the two countries have stalled despite efforts to stimulate investor interest. India, the fifth-largest economy in the world, is grappling with a dual challenge of stringent American tariffs on its exports and a significant capital flight.

However, there is a silver lining. The weakening rupee could make Indian exports more competitive. The US has imposed some of the highest tariffs in the world on Indian goods. This resulted in a 12% drop in exports to the American market in September, followed by an additional 8.5% decline in October. M.K. Stalin, the chief minister of Tamil Nadu, reported staggering losses for the region's textile industry due to these American tariffs.