USD/INR Price Forecast for 2021: The Uptrend Continues

Skerdian Meta • Sun, October 24, 2021 • 8 min read
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  • Technical Analysis
  • The price has left the 20 SMA behind since October

The COVID-19 pandemic had a major impact on all currencies, particularly the risk currencies, which went through a massive decline initially in February and March 2020, but then reversed back up. Although, as we mentioned in our USD/INR forecast for Q4 of 2020, while the gains in commodity currencies since March last year exceeded expectations, the gains in BRICK currencies of developing countries remained limited, particularly for the INR, even with the pronounced weakness in the US Dollar over the past year.

The fundamentals look promising for the Indian Rupee, with inflation falling off the highs above 7%, and foreign direct investment forecasts increasing by 15% in 2021, while foreign inflows into Indian equities rose to an all-time high in late 2020. The Indian GDP is expected at 9.6% in 2021 and 7% in 2022 according to Moody’s, as the country recovers from the effects of the coronavirus, which should be another positive factor for the INR, but the USD is starting to reverse as well, after the 1-year decline, aided by the new fiscal stimulus package which been approved. The technicals also point to further upside momentum in the long term, with the retrace lower already over.

Current USD/INR Price: $


Recent Changes in the USD/INR Price

Period Change ($) Change %
6 Months +1.64 +2.2%
1 Year -0.70 -1.1%
3 Years +6.20 +9.3%
5 Years +12.10 +19.8%
Since 200 +30.20 +69.6%


Factors Affecting the USD/INR

The USD/INR has been trading on a long-term bullish trend since the chart history shows, increasing many times in value, from around 10 in the late 1980s, to 77 back in April 2020, as the initial coronavirus panic sent the USD surging, while risk currencies crashed lower, particularly in March. The situation reversed in April, and the USD has been quite bearish since then, hence the decline in the USD/INR. Although, the decline only seems like a retrace before the long-term bullish trend resumes, as we will explain in the technical analysis section below. The slow gains in the INR were a strong indicator for this, at a time when the USD has been quite weak since March 2020, and other currencies have made some massive gains against the USD. In 2021, the Indian economy is expected to make a strong recovery, which is likely to help the Rupee, but so is the US economy, and the USD should reverse higher. This suggests a bullish USD/INR price forecast after the retrace down, which seems to have already ended and we already seeing attempts at resuming the bullish trend, after the 20 SMA held as support, as shown on the chart above.

USD/INR – Forecast Summary

USD/INR Forecast: H2 2021
Price: $75 – $76
Price drivers: US Politics, COVID-19, Risk sentiment, Risk Currencies
USD/INR Forecast: 1 Year
Price: $78- $80
Price drivers: FED rhetoric, Post COVID-19, Economic Recovery, Market sentiment, USD correlation
USD/INR Forecast: 3 Years
Price: $80 – $85
Price drivers: Developing Markets, Inflation, RBI actions, FED actions, Global politics


USD/INR Live Chart



Price Prediction for the Indian Rupee for the Next Five Years

Since April, the USD/INR has been retreating lower, although the long-term trend is clearly bullish, so we expect this pair to continue the decline for a bit longer, until it reaches the 20 monthly SMA, before it resumes the bullish trend again. Although, not everything is straightforward for this pair, since there are quite a few factors affecting it right now. The INR is certainly a risk currency, with India being a developing country, which is affected positively when the market sentiment is positive and since May 2020 the sentiment has been mainly positive for risk assets despite the coronavirus. But the USD is turning bullish too, which complicates the future for the INR. Not all brokers provide INR pairs to trade, although some forex brokers do.  

The Uptrend to Resume As COVID-19 Becomes the Norm?

The outbreak of the coronavirus sent traders and investors into panic mode, which often leads to a selloff in risk assets. The Indian Rupee is a pronounced risk currency, being from a developing country, so it turned bearish for about a month, with the USD also surging higher against all currencies. The USD/INR jumped from 72 to 78, but then the USD reversed and began the big decline. The COVID-19 pandemic turned out to be a massive negative factor for the USD, and as a result, the USD/INR has also been declining since April, and the price has fallen to the pre-pandemic levels, which means that all gains have been lost.

But the Indian Rupee hasn’t made the most of this pandemic. In fact, it has been lagging behind the risk currencies, such as the Australian Dollar and the Canadian Dollar, although it has been on par with other BRICK currencies, as we showed in the USD/BRL forecast earlier in 2020. When the coronavirus situation relaxed somewhat in summer and early autumn, the decline in the USD stopped, and we saw a bounce in this forex pair, but it didn’t last long before the retrace back down resumed again, as the number of new cases of coronavirus increased in the West and more restrictions followed.

Most people expect that the coronavirus situation will improve in the coming months, with the end of winter and the beginning of spring and the vaccines rolling out, although I don’t know how eager people are to take it. This means that the decline in the USD will probably come to an end. Judging by the price action in the USD/INR, which has stagnated since September, while other risk assets have continued to surge against the USD, we conclude that the retrace in this pair will end as the coronavirus retreats. Besides that, as the virus crisis comes to an end, the borrowing from governments and local authorities will end at some point, and the paybacks will start, which is a negative factor for the INR, but we will take a closer look at this in the next section.     

Can the Cash Flow in India’s Stock Markets and the FX Reserves Counterbalance the Post COVID-19 Debt Repayments?   

Speaking of debt during the coronavirus time, all countries loosened their purses, throwing all the financial debt and deficit rules out of the window. The debt in the US has increased to 102% of the GDP, from $ 23 trillion since the beginning of the pandemic to $ 27 trillion at the end of Q3, with the government spending $ 4 trillion. Another $ 2.3 billion is expected to come, with $ 900 million already signed off by Donald Trump at the end of 2020, while the total global debt has increased by $ 15 trillion during 2020, until the start of Q4. 

In India the debt is expected to reach record levels of 90% soon. The accumulated debt of $ 559 billion, to fight the economic effects of the coronavirus, accounted for nearly 3% of the total national debt, which still is not too bad when compared to other economies, particularly those in the west. Although, as with most developing countries, the problem is that the payment capacities of India, when time comes to repaying the monthly installments, is not as strong as those of developed nations. India has the highest debt in south Asia after Sri Lanka and Bhutan. A large part of this debt is borrowed by local governments/authorities, which makes it even more difficult to pay back. The problem gets worse when we take into account that the central banks will start raising interest rates as the restrictions ease in spring and summer, and the global economy starts recovering. 

Investment on debt have declined, while FX reserves have increased 

That will make foreign debt repayment more expensive, especially since the government doesn’t want a strong Rupee, in order to keep the economy as attractive as possible. On the other hand, the foreign currency reserves in India have been boosted in 2020, with the Reserve Bank of India (RBI) gathering foreign exchange reserves at a hungry pace. The INR has been increasing since April, making it cheaper to buy foreign currency. As a result, India became the 5th largest FX reserve holder by the end of 2020. This amount of forex reserves will come in handy when the repayment process gets underway. So, we will see in the coming months and years whether the debt repayment or the FX reserves and India’s attractive stock market, the Nifty 50, will have a bigger impact on the Rupee. It’s a long term battle for the Rupee, with the overall factors pointing down for this currency in the long run and up for USD/INR.     

Stimulus and Inflation 

With the economic meltdown during the coronavirus lock-down months in spring of 2020, which was nothing like we have seen before, as well as the increasing weakness in Q4 of the same year, governments and central banks around the globe spared all they had in economic stimulus packages in order to save the economy. On top of that, they borrowed extensive amounts of money and in fact, that has helped support the global economic recovery in summer to some degree. With the increase in coronavirus restrictions in winter last year, more economic stimulus bills/packages were coming. In the US, the plans were for a $ 2.3 billion coronavirus aid bill, $ 900 billion of which has been approved. The next part of the package should come soon. Regarding the FED, they cut interest rates to 0.10% during March, and don’t plan on easing any further; instead, they might start to tighten the monetary policy at some point in 2021, as recent comments by Jerome Powell suggest a less dovish FED. 

At the end of 2020, the Indian government introduced another major package as fiscal support, worth about 15% of the country’s GDP. On the monetary front, the Reserve bank of India (RBI) cut interest rates in the first half of 2020, but the rates are still high compared to the US and other developed countries. One of the reasons is the high inflation, which averaged above 7% for several months last year, as the table below shows, with the main drivers being the surge in onion and garlic prices. It cooled off at the end of the year, but remains really high at above 6%, which is preventing the RBI from cutting interest rates any further, as the governor Shaktikanta Das let us know in late 2002. On the other hand, at under 2%, inflation has been subdued in the US, so the divergence here also points up for this pair.     

Inflation in India from the BOI

Release Date Time Actual Forecast Previous
Jul 13, 2021 (Jun) 08:00 5.12% 5.30% 5.34%
Jun 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: Reserve Bank of India  

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

Year Export Import Trade Deficit
2000 36.3 50.2 -13.9
2001 43.1 60.8 -17.7
2002 42.5 54.5 -12.0
2003 44.5 53.8 -9.3
2004 48.3 61.6 -13.3
2005 57.24 74.15 -16.91
2006 69.18 89.33 -20.15
2007 76.23 113.1 -36.87
2008 112.0 100.9 -11.1
20019 176.4 305.5 -129.1
2010 168.2 274.3 -106.1
2011 201.1 327.0 -125.9
2012 299.4 461.4 -162.0
2013 298.4 500.4 -202.0
2014 313.2 467.5 -154.3
2015 318.2 462.9 -144.7
2016 310.3 447.9 -137.6
2017 262.3 381 -118.7
2018 303.52 465.58 -162.05
2019 330.07 514.07 -184
2020 314.31 467.19 -152.88
2021 365.45 561.8 -196.35

Source: Wikipedia   

USD/INR Technical Analysis – MAs Continue to Support the USD/INR

The USD/INR has been bullish for as long as the chart history shows. During this time, moving averages have been doing a fine job as support indicators, as the monthly chart below shows. When the trend was stronger, the smaller period moving averages, such as the 20 SMA (gray) and the 50 SMA (yellow) provided support, and while when the retraces down were weaker, the larger moving averages such as the 100 SMA (green) and the 200 SMA (purple) took up that duty. During the 1990s, the trend was quite strong, and the 20 SMA was the ultimate support indicator, with the 50 SMA helping as well. In the 2000s, we saw a decent retrace, which ended at the 200 SMA in 2008.

USD/INR is resuming the uptrend again after retreating for more than a year

It reversed higher back then, and in the first half of the last decade, the uptrend picked up pace, as the emerging markets were hit by the Greek debt crisis. We have seen several pullbacks since then, but they have all ended up at moving averages, and seems like the price is reversing back up t the 20 monthly SMA (gray) again, after the pullback, as the USD remained weak since the start of the coronavirus. So, the bullish trend is resuming again now and this pair is heading for new highs in the coming years.    

The trend has picked up pace since 2018 as the 100 SMA keeps pushing the price higher

On the daily chart, we can see that after the surge in February and March 2020, following the breakout of the coronavirus, this pair turned bearish, which came due to the decline in the USD. Moving averages turned into resistance, with the smaller ones such as the 20 SMA (gray) and the 50 SMA (yellow) pushing the price down when the decline picked up pace and the larger ones such as the 200 SMA (purple) ending the retraces higher. Although, we saw a 

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.