Rupee likely to remain in Rs 85-87 range against USD in 2025, US Fed may hold rates steady in next two policy cycles: SBI Report
May 06, 2025
New Delhi [India], May 6 : The Indian rupee is expected to remain stable in the range of Rs 85-87 against the US dollar through 2025, according to a recent report released by the State Bank of India (SBI).
The report highlighted several global and domestic factors that are likely to support the rupee and maintain stability in the USD/INR currency pair over the coming months.
"We expect the USD/INR pair to stabilize in the range Rs 85-87 for 2025, The domestic impact of tariffs on dollar will be visible in 2025 which will support rupee" the report noted.
SBI further pointed out that the DXY index, which tracks the strength of the US dollar against a basket of major currencies, is expected to decline as the US domestic economy adjusts to the impact of tariffs. A softer dollar would support emerging market currencies like the Indian rupee.
The report also referred to the Non-Deliverable Forward (NDF) market for USD/INR. The May 2026 USD/INR NDF is currently factoring in a rate of around Rs 85.87 to Rs 86 per dollar over a 12-month horizon, reflecting expectations of limited volatility in the currency pair going forward.
On the macroeconomic front, the report highlighted recent data from the United States. Annual inflation in the US eased to 2.4 per cent in March 2025. At the same time, the nonfarm payroll employment rose by 177,000 in April, while the unemployment rate remained steady at 4.2 percent.
However, the report cautioned that the full impact of tariffs on US inflation is yet to be reflected in the data. Successive inflation readings could come in higher, especially if short-term inflation expectations rise sharply.
Given the dual mandate of the US Federal Reserve -- focusing on inflation and employment -- the report suggests that the Fed may choose to hold interest rates steady in its next two policy cycles.
"A pause signal is unequivocal based on recent statements," SBI added.
The interplay of these factors -- a steady Fed, easing US inflation, and tariff effects -- is likely to create a supportive environment for the Indian rupee in 2025, SBI concluded.
