International banks are becoming increasingly optimistic about the future of Indian Rupee. Prominent lenders such as Bank of America (BofA), ANZ, and MUFG have raised their forecasts, predicting that the rupee will strengthen to 84 against the US dollar by December 2025.
Stronger foreign investment, an improving trade environment, and growing confidence in India’s economic prospects are all factors contributing to their optimistic outlook. Pro-growth policies of the Reserve Bank of India and declining oil prices are also contributing towards making the Indian rupee stronger.
BofA Repurposes Estimate on Rupee Appreciation
BofA Research was the latest to revise its estimate on May 22. It now forecasts the rupee to hit 84 against the US currency at year-end 2025, a sharp upgrade from its earlier estimate of 87. Stronger domestic fundamentals, a pro-growth RBI stance, and a declining US dollar were the three reasons given by the bank for the revision.
BofA also mentioned that after a slow start to the year, foreign equity inflows to India are now picking up steam. Recent RBI interest rate cuts in February and April are expected to boost economic growth and attract foreign investment.
Capital Flows Show a Turnaround
The second quarter is showing signs of recovery after the first quarter’s $13.5 billion outflow by foreign investors. $2.5 billion has already been inflowing, reflecting the revival of investor confidence. Market players are predicting a further 25-basis-point rate reduction in June, which may continue the momentum in capital inflow.
Trade and Oil Price Dynamics Favor the Rupee
Lower international crude oil prices are assisting in enhancing India’s terms of trade. BofA noted that this would help keep the current account deficit within limits, another positive for the rupee. Although there were concerns in the past regarding US tariffs on India, continual trade negotiations have contributed to alleviating such worries.
Other Banks Concur on Rupee Strengthening
BofA’s perception is not unique. MUFG Bank cut its rupee estimate to 84 from 87.5 three weeks ago. Even ANZ now foresees the rupee reaching 86 instead of 88.5 by December-end. HDFC Bank’s Sakshi Gupta also backed the perspective, attributing “a mild appreciation bias” due to falling commodity prices, dollar weakness, and India’s growth prospects.
With several global banks highlighting 84 as the target, the rupee seems to be on a long-term appreciation trend. The sum effect of domestic reforms, RBI actions, and external trade dynamics are all favoring the Indian currency. Yet, global uncertainties and policy changes may still have their impact. For the moment, however, optimism for rupee strength is in full swing.
