A recent Bank of Baroda report forecasts that the Indian Rupee will trade within a tight range of 86.5 to 87.5 per US dollar in the near term. The Reserve Bank of India (RBI) is expected to maintain limited intervention in the forex market, attributed to tight domestic liquidity conditions.
The report indicates that the Rupee reached a historic low of 87.58 against the dollar on February 6, 2025, amid global economic uncertainties. This downturn followed the US elections, where new policies on tariffs and taxes fortified the dollar, causing volatility detrimental to emerging market currencies, including the INR. However, the Rupee regained some strength as global concerns eased, notably when the US moderated its tariff stance.
Looking ahead, the Rupee’s trajectory will largely depend on the US dollar’s movement. The report cautions that an escalation in global trade tensions or a shift in US Federal Reserve policy may impose renewed pressure on the Rupee. Additionally, weak domestic equities and a subdued economic outlook contribute to the currency’s challenges, with the RBI’s lowered policy rate offering limited relief against tight liquidity constraints.
(With inputs from agencies.)
