Rupee May Touch 85/USD by Year-End: Experts

Economists say that the rupee may weaken further against the dollar by the end of this year. It is said that the local currency may be under pressure due to the strengthening of the dollar and the weakening of the Chinese currency, the yuan. In this regard, the Reserve Bank of India (RBI) is expected to be active in the currency market to support the rupee. According to IDFC First Bank, the rupee may touch 85 to the dollar by the end of this year. The rupee closed at 84.41 on Thursday. The currency market is closed on Friday.

The rupee has already depreciated by 0.33 percent against the dollar in November. The local currency, which was largely stable until September, came under pressure after the US Federal Reserve’s rate cuts followed Donald Trump’s victory in the US. Gaura Sen Gupta, Chief Economist, IDFC First Bank, said a lower balance of payments surplus would strengthen the dollar. A weakening yuan will put pressure on the rupee in fiscal 2025, he said. From October to November 8, the RBI made a net sale of $15.5 billion to limit the pace of the rupee’s decline.

The country’s foreign exchange reserves fell to $675.7 billion in the week ended November 8. To stop the rupee from falling, the RBI intervened in the currency market. In this sequence, the foreign exchange reserves decreased by 29 billion dollars in the last six weeks. Market participants say the RBI’s intervention in the foreign exchange market is more than usual and the central bank supports the rupee by selling dollars. RBI Governor Shaktikanta Das, on the other hand, recently said that the central bank’s intervention in the foreign exchange market is aimed at preventing extreme volatility and not at a limit.

Bank of Baroda Chief Economist Madan Sabnavis said the rupee will be tested at 84.50 against the dollar. He reminded that the strengthening of the dollar and the withdrawal of foreign investors is natural after Trump became the president of the United States. Limited interference was seen after the rupee crossed the 84 level. So the actions of RBI are also crucial, he said. The yield on 10-year US bonds has risen 20 basis points so far in November. The rupee has depreciated by 1.2 percent against the dollar so far in the current financial year, while the rupee has weakened by 1.5 percent this year.