Rupee may hold gains near 85.5/$ as greenback wobbles, shows BS poll

Experts peg rupee at 85.50 against dollar by June; RBI expected to boost dollar purchases

With Donald Trump’s reciprocal tariff policy raising concerns over US growth prospects and weakening the dollar, the rupee is expected to remain stable over the next few months, allowing the Indian central bank to shore up its foreign exchange (forex) reserves.

 

After touching record lows multiple times between December and February, the Indian unit made a sharp recovery from March onwards, gaining 0.44 per cent so far in 2025 against the dollar.

 

According to the median estimate from a Business Standard poll, the rupee is expected to trade at 85.5 per dollar by June-end, and 85.75 by September-end. The Indian unit closed at 85.24 per dollar on Friday, compared to its previous close of 85.44.

 

“A much more muted pace of rupee depreciation is likely, as dollar weakness is expected to persist amid weakening US growth. The reciprocal tariffs announced by President Trump were far steeper than expected and not tied to tariff differentials,” said Gaura Sen Gupta, chief economist at IDFC First Bank.

 

“The impact on global growth and US GDP is likely to be more pronounced, given the broad-based nature of the tariffs. With global conditions remaining volatile, we expect flows to emerging markets to stay muted. Meanwhile, the Reserve Bank of India (RBI) is likely to absorb any improvement in capital inflows to build its forex reserves, given its large negative forward book,” she added.

 

On Friday, the rupee strengthened past the 85-per-dollar mark to touch 84.95, tracking a drop in the dollar index.

 

Markets had expected the RBI to step in with dollar purchases in the forex market, but its absence surprised traders. The rupee crossed the 85-per-dollar mark for the first time this calendar year and for the first time since December 18, 2024.

 

The Indian currency had depreciated 2.42 per cent against the greenback in the previous financial year.

 

The RBI’s net short dollar position in the forward market stood at $77.5 billion as of end-January, according to central bank data. A portion of this was due to mature by March, while the remaining $30.6 billion — spread across six-month and one-year swaps — is expected to begin maturing in April.

 

India currently faces a relatively softer tax rate of 26 per cent compared to regional peers such as China, Vietnam, and Thailand — an advantage that has helped buoy up sentiment in the currency market. While the RBI has not been intervening aggressively for now, markets expect it to resume dollar accumulation soon.

 

“There’s a lot of uncertainty right now, with risk aversion taking hold. Given Trump’s ego and the ongoing trade wars, it’s very difficult to predict rates,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. “However, assuming calm returns in the next three to six months, India — being one of the lowest tariff countries in Asia, in talks with the US on tariffs, and among the fastest-growing economies — could see the rupee appreciate. Trump doesn’t like currency manipulation, after all.”

 

In March, the rupee regained strength against the dollar, buoyed up by fresh inflows after hitting new lows earlier in the year. The RBI intervened in the forex market to curb excess volatility and conducted buy/sell swap auctions, injecting rupee liquidity into the banking system and supporting the currency amid global uncertainty. As a result, the rupee strengthened through March, recovering from nearly 88 per dollar and regaining all its calendar-year losses.