BofA Warns of Rupee Headwinds in 2026: Capital Flows & Fed Policy Key

• Bank of America predicts a challenging 2026 for the Indian rupee, citing domestic balance of payments, global capital flows, and US monetary policy as key factors.
• The rupee has recently depreciated significantly, facing headwinds from a deteriorating current account and uncertain capital inflows.
• Aggressive US Federal Reserve rate cuts, while India holds steady, could support the rupee, but a new Fed Chair's stance is a significant swing factor.
• Asian currencies, including the rupee, are heavily influenced by the dollar's direction; aggressive Fed cuts would weaken the dollar and benefit them.
• BofA's Patrick Law suggests a non-consensus view that a new Fed chair might not aggressively cut rates, potentially leading to a stronger dollar in 2026.

Why It Matters: The rupee's future affects India's economy and global investment decisions.