UBS AM warms to beaten-down Indian rupee, but neutral on government debt

MUMBAI: The Indian rupee’s slide against the dollar has increased its allure for UBS Asset management ahead of a long-anticipated trade deal with the U.S., even as it remains neutral on Indian bonds.

“We like the currency and feel it is very cheap. The trade deal has not yet been announced but we are hopeful it would be announced soon, so at these levels, the currency is looking attractive,” said Shamaila Khan, head of fixed income emerging markets and Asia Pacific, UBS Asset management.

The Indian rupee has recovered partially from a record low of 91.0750 hit earlier in the month, but still remains down nearly 5% in 2025, the worst performing major Asian currency this year.

The rupee has been hit by weak investment flows and steep U.S. tariffs in the absence of a trade deal. Traders say the currency continues to face pressure despite the Reserve Bank of India keeping volatility in check.

Measured against a basket of trading-partner currencies, the rupee’s real effective exchange rate has fallen to a decadal low in ‘undervaluation’ territory, but investors reckon that may not be enough to drive a rebound just yet.

UBS, though, argues that the RBI allowing the currency to fall is a temporary phenomenon, intended to support exporters until a trade deal is reached.

“The cheapness of the currency is a new development, so investors should look at that, as the fundamentals of the country look intact and when Indian assets cheapen, it is an opportunity for us,” Khan said, noting that she expects a trade deal with the U.S. in the next few months.