Rupee at 100 in 2026? This key factor can push the Indian currency to three-digit mark

Rupee weakness: The question of whether USD/INR could drift closer to the 100 level in 2026 is no longer confined to market speculation; it has steadily entered serious macroeconomic and policy discussions. This debate, however, is not about India losing its growth momentum. Rather, it reflects how structural pressures, global forces, and shifts in domestic market design are influencing the rupee’s behaviour.  

India continues to be one of the fastest-growing large economies globally. Domestic consumption remains resilient, corporate balance sheets are healthier than in earlier cycles, and equity markets continue to display depth and stability. Yet, the currency market presents a contrasting picture—marked by thinning liquidity, largely one-sided price movements, and an increasing reliance on central bank intervention.

This divergence between equity and currency markets lies at the heart of the discussion. Understanding it is essential to assessing whether USD/INR nearing the 100 level is a real risk and, more importantly, how that risk can be managed.

Why Equity Markets Are Stable but the Rupee Is Not

Indian equity markets have shown remarkable resilience, even during periods of global uncertainty. The reason is straightforward: participation.

Whenever the Nifty, Bank Nifty, or Sensex corrects, domestic investors step in. Retail investors, mutual funds, and long-term allocators absorb selling pressure. Liquidity exists on both sides of the market, allowing prices to adjust in a balanced manner rather than move sharply in one direction. This participation-driven structure enables equity markets to self-correct.

The currency market, however, does not enjoy the same balance today.

Following regulatory changes in 2024 that restricted participation in exchange-traded currency derivatives to entities with proven underlying exposure, a large section of liquidity providers exited the market. Retail traders, proprietary desks, and arbitrage participants—who historically ensured two-way liquidity and efficient price discovery—were effectively removed from the ecosystem.

The outcome has been a structurally weaker currency market.

Liquidity and Price Discovery: The Core Issue

Liquidity is often misunderstood as speculation. In reality, liquidity is a stabilising force. Following the regulatory shift, onshore currency derivatives volumes declined sharply. USD/INR futures turnover on Indian exchanges fell by nearly 80–90%, significantly weakening price discovery. With fewer participants, the market became shallow.

In such an environment, when dollar demand rises—whether due to global risk aversion, capital outflows, or trade-related requirements—there are limited natural sellers to counterbalance the move. As a result, USD/INR tends to move in a single direction, with only brief and shallow corrections. Thin markets do not reduce volatility; they amplify it.

Offshore Migration and Loss of Control

Markets do not disappear when participation is restricted; they relocate. As domestic activity declined, price discovery increasingly shifted to offshore venues such as SGX USD/INR futures. This shift carries important implications, as Indian markets risk becoming price takers rather than price setters in their own currency.

The erosion of onshore price discovery has also increased reliance on RBI intervention in the spot and forward markets. While such intervention can help smooth volatility and prevent disorderly moves, it cannot sustainably replace market-driven liquidity. Over time, this places greater operational pressure on the central bank.

Global and Structural Drivers of Rupee Weakness

The rupee’s pressure is not driven by domestic factors alone. Several global and structural forces continue to weigh on USD/INR, including sustained strength in the US dollar during periods of global uncertainty; volatile capital flows and intermittent foreign portfolio outflows; trade and current account pressures in a commodity-import-dependent economy; and rising geopolitical risks that push investors toward safe-haven assets.

In deep and liquid markets, these forces are absorbed gradually. In shallow markets, however, they tend to translate directly into sharper currency depreciation.

Currency Weakness and the Precious Metals Loop

Rupee depreciation has had clear spillover effects, particularly in precious metals. India imports almost all of its gold and a significant portion of its silver, both of which are priced globally in US dollars. As the rupee weakens, these commodities become more expensive in rupee terms, pushing domestic prices higher. This arithmetic impact has amplified gold’s rally to record highs and silver’s move to multi-year peaks.

Beyond pricing mechanics, currency weakness also signals uncertainty. Investors and central bank respond by increasing allocations to gold and silver as hedges. This creates a feedback loop: higher precious metal imports widen the trade deficit, increase dollar demand, and further pressure the rupee.

Is USD/INR Near 100 a Real Risk?

USD/INR moving toward the 100 level does not require a crisis; it requires persistence. If global dollar strength continues, capital flows remain volatile, and domestic currency markets stay structurally thin, depreciation can occur gradually over time. Such a move would reflect market structure and global alignment rather than a loss of confidence in India’s economic fundamentals.

Exchange rates often reflect supply–demand dynamics and policy design as much as economic growth.

How the Rupee Can Be Stabilised

Stabilisation does not lie in tighter controls; it lies in smarter market design. First, participation needs recalibration rather than exclusion. Allowing retail and non-hedging participants back into currency markets with calibrated position limits, robust margin frameworks, and effective surveillance can help restore two-way liquidity.

Second, strengthening onshore price discovery is critical. Encouraging domestic trading activity reduces offshore dependence and improves transparency.

Third, export diversification and sustained trade expansion remain essential to reducing structural dollar demand. Finally, close coordination between the RBI and SEBI is vital. Currency markets must be treated as integrated ecosystems rather than isolated risk zones. Encouragingly, discussions around such calibrated reforms are already underway.

The Missing Link in Rupee Stability: Participation  

India’s equity markets are strong because Indians are allowed to participate in India’s growth. The currency market has weakened because that participation has largely been removed. USD/INR approaching 100 in 2026 is not inevitable, but it is a risk that deserves serious attention.

Addressing this risk requires restoring liquidity, confidence, and balance to currency markets, rather than relying solely on regulation and intervention. A strong economy ultimately needs a strong, liquid, and participatory currency market. The path to rupee stability lies there.

 The writer Ponmudi R is CEO at Enrich Money.