Indian Rupee Expected to Slightly Appreciate Against US Dollar: Reuters Poll
Indian Rupee to Gain Slightly in the Coming Year
The Indian rupee is projected to remain in a tight range and appreciate slightly against the U.S. dollar over the next year, according to a recent Reuters poll. Despite a robust economy, the Reserve Bank of India (RBI) continues to intervene in currency markets, contributing to the rupee’s modest gains against the greenback.
Minimal Strengthening of Rupee Against Dollar
The rupee has seen a marginal 0.2% increase against the dollar since the beginning of the year, primarily attributed to reduced expectations for an early rate cut by the U.S. Federal Reserve, which has bolstered the dollar’s position.
Forecasts for Rupee’s Performance
Analysts predict a slight strengthening of the Indian currency, with expectations for the rupee to reach 83.00 against the dollar in a month and 82.84 in three months, based on the February 2-6 Reuters poll of 42 foreign exchange analysts.
Long-Term Outlook and Factors Influencing Rupee
Despite the rupee’s outperformance compared to its Asian counterparts, experts anticipate that currencies such as the , Thai baht, and Korean won may witness greater gains by the end of January 2025. Factors such as a supportive balance of payments and the eventual softening of the dollar are expected to pave the way for modest appreciation of the rupee over the longer horizon.
Impact of Fed’s Policies on Rupee
The delay in an anticipated interest rate cut by the U.S. Federal Reserve has contributed to the dollar’s dominance over other currencies. However, the RBI is still expected to cut rates later this year, albeit at a slower pace than the Fed, potentially prolonging the relative strength of the rupee.
Market Inflows and RBI’s Interventions
India has witnessed significant inflows into its bond markets from foreign investors, supported by JPMorgan’s decision to add the country’s debt to its indexes. Additionally, the RBI’s focus on using foreign exchange reserves to mitigate volatility from broader USD moves is expected to limit any substantial gains in the rupee.
For other stories from the February Reuters foreign exchange poll:
