Rupee gains post RBI policy; analysts say may rise to 90/$ by year-end

Rupee outlook: The rupee gained 26 paise to trade at 95.12 against the US dollar following the RBI Monetary Policy Committee's (MPC) decision on Wednesday. The gains were also supported by falling crude oil prices following progress in US-Iran talks.

 

Analysts said that holding interest rates steady stabilises the rupee by preventing capital outflows linked to reduced yield returns on Indian assets. This stability is crucial amid geopolitical tensions and volatile crude oil prices, which threaten India’s import bill. 

In the coming one to three months, Naveen Mathur, director, commodities & currencies, Anand Rathi Share and Stock Brokers, said that the rupee will be driven mainly by the international scenario, especially crude oil prices and Fed policies.

    Rupee may move back towards 90. Analysts expect the rupee to improve further and may move back towards 90 by the end of this year, supported by several reasons, including a drop in oil prices and FIIs showing positive signs.  

"FIIs have marginally returned to buying, suggesting that aggressive and consistent selling of Indian equities is likely behind us," G Chokkalingam, founder, Equinomics Research, said.

 

“Moreover, several US companies, including Amazon, Google and Microsoft, committed to investing in India in 2025. These investments should start materialising from FY27. Given these factors, I expect the rupee to move back towards 90 to the dollar within this year, while in the near term, it could appreciate to around 93," he added.

 

Earlier this morning, in an expected move, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept repo rate unchanged for the third time in a row at 5.25 per cent with a neutral stance. 

  Rupee may further strengthen, says RBI Guv  "The underlining fundamentals of Indian economy are very strong. It is quite possible, going forward, as the tensions and conflict de-escalate, rupee may further strengthen. Rupee has strengthened over the past one month from 97 to 95 levels. Our policy has always been that let markets determine the levels and bands, we don't pursue. We only intervene when there is excessive volatility, speculative pressure," RBI Governor Sanjay Malhotra said while addressing the media after RBI MPC.

 

Analysts said that the RBI has maintained investor confidence and this supports foreign portfolio inflows with strong domestic GDP growth projections. Additionally, the RBI's continued management of foreign exchange markets helps mitigate excessive volatility without necessitating abrupt rate hikes.

 

VK Vijayakumar, chief investment strategist, Geojit Investments, said that the rupee trajectory, going forward, will be influenced by the FII action and the inflows expected from FCNR (B) deposits and ECBs under the concessional swap window. It has been reported that these receipts have already crossed $41 billion and perhaps another $40 billion in inflows are likely by September 30th.

 

"This, along with FIIs turning buyers now, is positive for the rupee. If the decline in crude price happening now continues, that will be another positive for the rupee. Rupee has the potential to appreciate to 94 to the dollar by the year end," he said.

 

Aamir Makda, commodity & currency analyst, Choice Broking, said that after the interest rate announcement, USD/INR has inclined and "we are expecting INR likely to remain in the range of 95 – 96 against US Dollar." "Immediate support for INR would be at 94.70, breakout below this mark will strengthen it towards 94.30 - 94," he said.  "Absent any sharp rise in crude prices or a change in the Fed rate expectations, the USD/INR pair is expected to move in the range of ₹94.50–₹96.30, helped by ample forex reserves, RBI intervention, and healthy foreign inflows," Naveen said.

 

Notably, the rupee has been depreciating continuously since the beginning of this year. The rupee has been hovering between 95 and 96 against the dollar. Once considered among Asia's more stable currencies, the rupee has now become one of the worst-performing emerging market currencies.  Abhishek Bisen, head fixed income, Kotak AMC, said given the strong FCNR flow, brent below $80 dollar, equities doing relatively well, and positive flows, rupee is likely to stabilise around current levels. "We expect rupee to remain in range of 94-97 in the near to medium term. Unless there is a material change in above variables this range is likely to hold well."  ==================================================== 

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