Indian Rupee Set to Weaken Further, May Hit New Low of 85/$ in 6 Months, Says Reuters Poll
The Indian rupee (INR) is expected to breach the 85 per US dollar mark in the next six months, reaching a new low, despite continued interventions by the Reserve Bank of India (RBI) to curb its losses, according to a Reuters poll of foreign exchange strategists.
The poll results come just days after news that India’s growth, the world’s fastest growing major economy this year, unexpectedly slowed to 5.4% in the latest quarter, sparking speculation that the RBI may cut interest rates in its upcoming meeting. However, only five out of 67 economists polled by Reuters in late November predicted a rate cut for this month, with most expecting two quarter-point cuts in the first half of 2025.
Meanwhile, the U.S. dollar has surged by nearly 6% since October, driven in part by U.S. President-elect Donald Trump’s proposed tariffs, which are expected to fuel inflation in the world’s largest economy.
In an effort to shield the rupee, the RBI has spent nearly $50 billion of its foreign exchange reserves since early October. Despite these efforts, the rupee weakened to a record low of 84.74/$ on Tuesday, with foreign investors pulling more than $13 billion from India over the same period.
The Reuters poll, conducted from December 2-4 among 41 FX strategists, forecasts the rupee to trade at around 84.85/$ in three months and 85.12/$ in six months, both new lows. The rupee was trading at approximately 84.72/$ on Wednesday.
ANZ FX strategist Dhiraj Nim said, “The only way for USD/INR is weaker, and this time it’s even more pressing. One reason is external headwinds, and the second is the worsening domestic macroeconomic situation.” He added that every tweet from President Trump adds pressure on emerging market currencies, especially when India is mentioned, noting that the rupee is overvalued compared to other Asian currencies and likely needs to weaken further.
Median forecasts from the poll indicate the rupee will weaken by about 1% to 85.49/$ in a year, with estimates ranging from 82.17 to 88.00/$.
According to RBI data, the trade-weighted real effective exchange rate (REER) suggests the rupee is overvalued by around 7%, indicating there is room for the RBI to manage a gradual decline in the currency.
Anil Bhansali, head of treasury at Finrex Treasury Advisors, stated, “India remains the fastest-growing economy in the world, and I believe the downturn can be countered with more government spending, small cuts in interest rates, and continued efforts to keep the currency weak as it has been managed so far.”
