Rupee forecast: Analysts predict steady decline amid tariff pressures

The Indian rupee will avoid a further dramatic slide after falling through 88 per U.S. dollar this week, according to a Reuters poll of foreign exchange analysts, but over one-third expect the currency to drift toward 90 as long as hefty U.S. tariffs on Indian goods stay in force.

Indian rupee strengthens against US dollar — Rupee forecast: Analysts predict steady decline amid tariff pressuresIANS

Recent data suggests that the Indian rupee, which slipped below 88 per U.S. dollar this week, may not see a sharp decline, according to a poll conducted by Reuters. However, over 33% of analysts foresee the currency inching closer to 90 if the heavy U.S. tariffs on Indian goods persist.

The rupee hit a record low of 88.33 against the dollar earlier this week before recovering marginally due to intervention by the Reserve Bank of India (RBI). This intervention involved utilizing part of the RBI's $690 billion reserves to sell dollars and control the outflows.

Despite a robust 7.8% economic growth reported by India in the last quarter, experts suggest that the rupee's downward trend is unlikely to reverse. The looming threat of the punitive 50% U.S. tariffs, one of the steepest globally, is expected to impact trade and capital inflows.

Analysts predict the rupee to stand at 88.04 against the dollar by the end of September, gradually easing to 87.75 by November, before a slight rise to 87.51 by the end of February. However, the overall sentiment among forecasters is bearish, with more than half expecting the currency to hit a new low within the next year.

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STCI's Chief Economist Aditya Vyas noted that the rupee has been historically overvalued, leading to consistent depreciation against the dollar. Despite India's efforts to boost economic growth, uncertainties surrounding trade dynamics continue to weigh on the currency.

Teresa John, Deputy Head of Research at Nirmal Bang, warns of further weakness in the rupee, attributing it to ongoing trade tensions and high tariffs. She anticipates the rupee to weaken to 89.5 against the dollar within a year, with a minimal risk of crossing the 90 mark.

As market conditions remain unpredictable, the RBI's main objective is to prevent panic selling rather than defend a specific exchange rate. With the trajectory of the rupee dependent on external factors like trade policies and global economic conditions, analysts suggest staying cautious in the face of potential currency fluctuations.

Overall, the forecast for the rupee is clouded by uncertainty, signaling a challenging road ahead for the Indian currency.