NEW DELHI, India — Global currency markets are experiencing heightened volatility as the U.S. dollar continues to weaken against major currencies, while the Indian rupee has shown relative stability, a trend that could support renewed foreign institutional investor inflows into India, according to a new report released Tuesday.
In a note, Emkay Wealth Management Limited said the recent decline in the dollar has been driven by expectations of further interest rate cuts by the U.S. Federal Reserve, along with ongoing geopolitical developments that have unsettled currency markets.
Market participants cited in the report said the Federal Reserve’s accommodative stance and growing expectations of additional rate reductions have weighed on the dollar in recent months.
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, as markets increasingly expect the currency to consolidate near current levels in the near term, the report said.
“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,” Emkay Wealth Management said.
Foreign institutional investors have been net sellers in Indian equities for roughly 18 months, a trend that has led to more attractive valuations across several sectors. Analysts noted that deeper rate cuts in the U.S. could compress dollar yields and revive investor interest in emerging markets, including 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 at Emkay Wealth Management.
The Dollar Index has fallen nearly 9 percent since early 2025, slipping to around 98.60.
Currency experts also pointed to growing investor scepticism toward the dollar, fueled in part by speculation about a possible 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 a prolonged low interest rate environment, potentially putting further pressure on the dollar.
At the same time, the firm cautioned that prudent hedging strategies remain important, noting that disruptions to shipping lanes or oil flows could trigger short-term spikes in crude prices and prompt temporary flights back to the dollar. (Source: IANS)
