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USD/INR Price Forecast Q4 2020: Will the Pullback Continue?

Published on Mon, September 28, 2020 by
Skerdian Meta • 6 min read

Last Update: January 11th, 2022


India is a developing economy, and as such, it attracts foreign direct investments (FDI). This should keep the Indian Rupee well supported, much like the Chinese Yuan, which has forced the People’s Bank of China to peg its currency to the USD. The foreign investments are made in a foreign currency, mainly in USD outside of Europe, yet the Rupee has been declining against the USD throughout the previous decade. While the USD index was bullish until 2017, it doesn’t explain the 200% appreciation of the USD/INR since 2010. Inflation explains it partly, because, at above 6%, which is supposed to be the ceiling set by the Reserve Bank of India, it is pretty high in that country. Recent coronavirus events have not been very positive for the Rupee either.  

Read the latest Update at the USD/INR Price Forecast

Current USD/INR Price: $


Recent Changes in the USD/INR Price

Period Change ($) Change %
30 Days -0.05 -0.7%
6 Months -0.02 -0.3%
1 Year +0.31 +4.2%
5 Years +0.73 +9.9%
Since 2010 +2.94 +39.9%

Recently, most trading assets have been moving, based on the sentiment in financial markets, especially from February until April, while since then, the weakness of the USD has dominated markets. The Indian Rupee took a big hit during the panic period at the end of February and the beginning of March, as almost everything crashed, apart from the USD. But, while other assets have turned tail against the USD, and have gained considerable value, the Rupee has remained largely stagnant. This sort of price action, coupled with the long-term uptrend in the USD/INR, is making the outlook for the Indian Rupee negative, as we look to the years ahead. 


USD/INR Forecast: Q4 2020 USD/INR Forecast: 1 Year USD/INR Forecast: 3 Years
Price: $ 78-80
Price drivers: Covid-19, Risk Sentiment, RBI Rates                                                             
Price: $ 82-84
Price drivers: Market Sentiment, Economic Recovery, Developing Markets, USD Correlation
Price: $ 88-90
Price drivers: Drivers: Inflation, Economic Recovery, Developing Markets, RBI Actions, Inflation

USD/INR Live Chart


In this article, we will take a look at the Indian Rupee, from both a fundamental and a technical point of view. The fundamentals look pretty gloomy for the Rupee right now, due to the uncertainty about the future of the global economy, as a result of the coronavirus pandemic and the lockdowns. The world has changed, and this increases the uncertainty further, especially for risk currencies, such as those of the emerging markets. Inflation has surged in India since Q4 of last year, which goes in the opposite direction to the other developed countries, while the RBI is still cutting interest rates. The technical analysis also points down for the Rupee, with the USD/INR having been bullish since the 1990s.

Price Prediction for the Indian Rupee for the Next Five Years

Market Sentiment and Covid-19 

With India being an emerging market, the Rupee is a risk currency, just like the commodity currencies. It usually increases during times of economic expansion and falls during global economic hardships. The Rupee has been on a long-term downtrend, but the market sentiment is still an issue for those who trade the Indian Rupee in the short to mid-term. The sentiment was quite negative from February until April, when the uncertainty hit the markets. The level of uncertainty is still pretty high, but at least the sentiment in financial markets has improved since the end of the lockdowns. Risk assets have turned quite bullish during the last three months, and the Rupee has made some advances against the USD. But, those advances have been quite small, compared to other risk currencies, which means that the better way to trade the sentiment in the USD/INR would be to buy this pair in times of uncertainty, since it is guaranteed to move higher, as it gets a double kick.

Inflation and RBI Policy

As a developing nation, the inflation in India is higher than in other countries. While in developed countries, the target rate for CPI (Consumer Price Index) inflation is around 2% for central banks, the Reserve Bank of India (RBI) holds the ceiling at 4%. The problem is that the inflation rate has increased considerably since the last few months of 2019. Inflation increased to 3.99% in September last year, then it increased to above 4% in October last year. At some points, inflation reached 7.59%, as coronavirus lockdowns disrupted supply chains globally, especially from China, since India is a major importer of Chinese goods, after the EU and the US. Inflation obviously weakens the currency, although the decline in oil prices might make up for some of it, but even crude oil has bounced back up now. The RBI cut interest and deposit rates in the first half of 2020, and some are expecting further cuts here, despite the high inflation rate. This will result in further weakness for the Rupee  

Release Date Time Actual Forecast Previous
Jul 13, 2020 (Jun) 08:00 6.09% 5.30% 5.84%
May 12, 2020 (Apr) 08:00 5.84% 5.68% 5.91%
Apr 13, 2020 (Mar) 08:00 5.91% 5.93% 6.58%
Mar 12, 2020 (Feb) 08:00 6.58% 6.80% 7.59%
Feb 12, 2020 (Jan) 08:00 7.59% 7.40% 7.35%
Jan 13, 2020 (Dec) 08:00 7.35% 6.20% 5.54%
Dec 12, 2019 (Nov) 08:00 5.54% 5.26% 4.62%
Nov 13, 2019 (Oct) 08:00 4.62% 4.25% 3.99%
Oct 14, 2019 (Sep) 08:00 3.99% 3.70% 3.28%
Sep 12, 2019 (Aug) 08:00 3.21% 3.30% 3.15%
Aug 13, 2019 (Jul) 08:00 3.15% 3.20% 3.18%
Jul 12, 2019 (Jun) 08:00 3.18% 3.20% 3.05%
Source: Bank of India  
USD/INR Correlation

While every currency has its own mind, and should be judged according to its own actions, the currencies in the developing markets are prone to any price action in the USD, since they are usually traded against the USD, just like commodities. In order to see the difference in performance between the USD index DXY and a certain currency, we should put the DXY and the cross currency index, in this case, the USD/INR, on top of each other. This way we can see their differences on the charts. Looking at the two monthly charts below, from 2007 onward, we can see that while the DXY traded sideways until July 2014, and the USD/INR surged higher in 2013. That was due to a number of factors, namely the FED tapering the excessive cash outflow, a bottleneck in FDIs and a growing current account deficit in India. This shows that the Rupee has been quite weak on its own, despite the appreciation in the USD. Another example is the DXY pullback from January 2017 until 2018, when it lost around 15% of its value, as the DXY fell around 16 points. On the other hand, the USD/INR only lost around 7% of its value during 2017. This shows that the pressure for the Rupee has been towards the downside. So, while the USD might still weaken, as the US elections approach and the political war gets tougher, don’t expect this pair to fall too much, since it didn’t decline much, even when the USD crashed lower from May to July this year.


The US index was trading sideways from 2009 until 2014


The USD/INR on the other hand, has been bullish

Developing, Import Oriented Market

India is a developing nation, and one of the major emerging markets, which makes it an attractive location for Foreign Direct Investment. The average estimate in recent years ranges from $ 50 billion to $ 70 billion, adding up to around $ 1.5 trillion since 1995, which is a massive amount. But, India is still an import economy, mainly in terms of petroleum, jewelry, machinery, chemicals etc. That creates some negative difference in import/export for the economy, and puts the Indian Rupee under pressure, since imports require large amounts of domestic cash (Rupee) to be exported, in exchange for foreign currency. That’s one of the main reasons why the Indian Rupee has been in constant decline since the peg to the USD was removed. Unfortunately, the trade deficit has only been increasing, despite the FDIs, which doesn’t paint a bright picture for the future as far as the Rupee is concerned. India will have to go through some more structural changes in order to balance import-exports, which is not so easy to do, even though production within the country has increased, partly due to cheap labour. Although India might be a net profiteer from the trade war between the US and China, Rupee traders will have to watch how much investment India attracts during this period, and whether this increases disproportionally or not at all.   

Summary table of recent Indian Foreign Trade (in billion $)

Year Export Import Trade


1999 36.3 50.2 -13.9
2000 43.1 60.8 -17.7
2001 42.5 54.5 -12.0
2002 44.5 53.8 -9.3
2003 48.3 61.6 -13.3
2004 57.24 74.15 -16.91
2005 69.18 89.33 -20.15
2006 76.23 113.1 -36.87
2007 112.0 100.9 -11.1
2008 176.4 305.5 -129.1
2009 168.2 274.3 -106.1
2010 201.1 327.0 -125.9
2011 299.4 461.4 -162.0
2012 298.4 500.4 -202.0
2013 313.2 467.5 -154.3
2014 318.2 462.9 -144.7
2015 310.3 447.9 -137.6
2016 262.3 381 -118.7
2017 275.8 384.3 -108.5
2018 303.52 465.58 -162.05
2019 330.07 514.07 -184
2020 314.31 467.19 -152.88

Source: Wikipedia       

Technical Analysis – Will Moving Averages Keep Pushing the USD/INR Up?


The most visible thing that catches your eye on the USD/INR monthly chart is the undisputed bullish trend. This means that the Indian Rupee has been bearish as long as the chart shows.  This forex pair was bearish even before that, beginning in 1990, but the trend has been picking up pace since 2007. There haven’t been many times, if any, when sellers have questioned the uptrend. The bullish trend has unfolded in the most normal way possible, with buyers pushing higher, retreating to regain strength and then making a new high. This has been going on forever, and it seems like it will continue for a while longer, as the monthly USD/INR chart suggests.

MAs have been supporting the USD/INR during the uptrend


During this time, moving averages have been doing a great job in providing support for this pair during pullbacks lower. The smaller 20 SMA (gray) has pushed the price higher when the trend has picked up pace, then the 50 monthly SMA (yellow) has taken over when the pace has slowed. On the last two occasions, the pullback has ended and the uptrend has resumed, after the price formed a pin or a doji candlestick at these moving averages. In the first instance, the USD/INR formed a doji right at the 50 SMA in January 2018, before making a strong bullish move in February that year. In July, the price formed a pin this time, which was followed by an even stronger bullish candlestick in August. The USD/INR made another strong move higher in March 2020, as traders panicked, and this was followed by several bearish reversing candlesticks, although, there was no real follow-through, and his pair remains bullish, which is yet another signal from the USD/INR technical analysis, that points to a further upside in the coming years.

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About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.