The Indian rupee is poised to become Asia's top-performing high-yield currency in the coming year, according to ING Groep NV. Analysts suggest that a potential US-India trade deal could reverse the rupee's underperformance, which has lagged behind most regional peers this year.

In a report dated November 10, economists led by Deepali Bhargava forecast the rupee strengthening to 87 per US dollar by end-2026, marking a 2% appreciation from current levels. ING highlighted that the rupee trades below its estimated fair value based on real effective exchange rate metrics, positioning it as one of Asia's most undervalued currencies with significant upside potential.

Year-to-date, the rupee has depreciated 3.5% against the dollar, ranking as Asia's second-worst performer. Pressure stems from US-imposed 50% tariffs—the region's highest—prompting intervention by India's central bank to curb speculative bets against the currency.

Recent remarks by former US President Donald Trump signaling progress toward a bilateral trade deal may bolster the rupee's outlook. On Tuesday, the currency held steady at 88.70 per dollar, hovering near record lows after two consecutive days of declines.

"A positive breakthrough in trade talks could trigger a meaningful rebound for the rupee," ING economists noted. "India remains a standout among high-yield currencies, with robust fundamentals, contained fiscal risks, and ongoing foreign investment inflows driven by supply chain diversification."

Investor sentiment toward Indian assets is improving as equity valuations correct and bond yields remain among Asia's highest. Goldman Sachs has joined Société Générale and HSBC Holdings in upgrading Indian equities, anticipating a market rebound.