Exchange Rate Outlook for FY26

 USD/INR Exchange Rate Forecast

• Q1FY26: 86.25

• Q2FY26: 86.75

• Q3FY26: 87.25

• Q4FY26: 87.50

• FY26 Average: 86.94

Key Views: The Indian rupee faces multiple headwinds despite the current account being in surplus. Foreign Portfolio Investor (FPI) outflows and the Reserve Bank of India’s (RBI) substantial outstanding forward contracts have limited the scope for sharp rupee appreciation. While these pressures are expected to ease gradually, any significant recovery will likely depend on a favorable shift in FPI sentiment. The added uncertainty stemming from US tariff policies further complicates the outlook.

EUR/USD Exchange Rate Forecast

• Q1FY26: 1.10

• Q2FY26: 1.11

• Q3FY26: 1.12

• Q4FY26: 1.12

• FY26 Average: 1.11

Key Views: The euro is poised for volatility in 2025, driven by geopolitical concerns and U.S. tariff actions. Nevertheless, Germany's recent fiscal expansion has bolstered optimism for a stronger euro trajectory. While positive sentiment prevails, the lasting impact of US tariffs may take time to subside. Additionally, inflationary trends in other economies could exert upward pressure on the euro.

Conclusion

FY26 presents a complex foreign exchange landscape. While India's rupee faces supply-demand imbalances and external pressure, the euro's trajectory will be influenced by both fiscal policy shifts and trade tensions. Investors should remain attentive to evolving global economic conditions.