UBS Asset Management Sees Value in Weak Indian Rupee, Stays Neutral on Government Bonds
UBS Asset Management has turned positive on the Indian rupee after its sharp decline against the U.S. dollar, calling the currency undervalued and attractive at current levels. The asset manager expects a long-awaited U.S.–India trade deal to be announced in the coming months, which could support a recovery. Although the rupee has rebounded from its recent record low, it remains nearly 5% weaker in 2025, making it the worst-performing major Asian currency this year.
According to UBS, weak capital inflows and high U.S. tariffs have weighed on the rupee, even as the Reserve Bank of India (RBI) has worked to limit volatility. The rupee’s real effective exchange rate has dropped to a decade low, signaling undervaluation. UBS believes the RBI’s tolerance for a weaker currency is temporary and aimed at supporting exporters until trade clarity emerges, while underlying economic fundamentals remain stable.
Despite its optimism on the currency, UBS Asset Management is neutral to underweight on Indian government bonds, citing expensive valuations. The firm notes that bond yields do not offer sufficient value compared to the rupee, especially as foreign investors pull funds amid concerns over limited scope for further rate cuts and the impact of higher withholding taxes on returns.
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