As per FX experts, we can anticipate the Indian Rupee to hold steady within a confined range in the upcoming months. This means it’s likely to remain relatively stable without undergoing significant fluctuations. This is because the Reserve Bank of India will continue to intervene in the market to steer the currency away from the strong American Dollar, ensuring stability.
Even though many currencies in emerging markets have faced challenges recently due to the ‘higher-for-longer’ interest rates in the U.S., the Indian rupee has shown remarkable resilience. It’s only dipped slightly, less than 1% this year. However, it’s worth noting that the rupee has been trading close to its all-time low against the dollar, around 83.29. According to a recent survey of experts, they predict a modest rise, with the rupee trading at about 83.00 against the dollar in the next one to three months, compared to its current rate of about 83.24.
The rupee’s recent performance against the dollar has raised some eyebrows. It seems like the Reserve Bank of India (RBI) might be playing a role in keeping it in a narrow range. According to Robert Carnell from ING, this isn’t purely based on economic factors, but more likely a managed effort.
The overall expectation is that the US dollar might continue to hold its strength, which could affect all currencies compared to it. The RBI’s foreign reserves have also dipped to a four-month low, standing at $590.7 billion as of September 22. This could further decrease due to the sharp increase in oil prices, which is a significant import for India. Last quarter, oil prices shot up nearly 30%, almost touching $98 per barrel just last week.
More than half of the experts, about 60%, predict that the rupee might hit an all-time low in the coming year.
According to Dhiraj Nim, an FX strategist at ANZ, the USD/INR exchange rate might not see big swings in the short run due to a strong dollar and unpredictable oil prices. However, over the next year, it could slightly strengthen as the balance of payments situation in India gets better and the U.S. dollar stabilizes.
The rupee is anticipated to inch up by just under 1% to reach 82.50 against the dollar in a year.
