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Rupee's Fall: Experts See Stability Despite RBI Efforts
6 May
Summary
- Analysts predict rupee near 95 per dollar over one year.
- RBI's short dollar position hits record $100 billion.
- Foreign investors have pulled over $21 billion from Indian equities.
The Indian rupee is projected to hold steady around 95 against the US dollar in the coming year, according to a Reuters poll of 39 currency analysts. This forecast persists despite the rupee's consistent weakening, driven by persistent foreign capital outflows. The Reserve Bank of India's aggressive intervention to support the currency has led to a record short dollar position exceeding $100 billion. Nevertheless, none of the analysts predict the rupee to reach the psychologically significant 100 per dollar mark within the next 12 months.
Foreign investors have divested over $21 billion from Indian equities year-to-date, significantly impacting the rupee's value. Some economists warn that the market is underestimating the effect of these outflows, suggesting the RBI might be running out of effective measures. Despite substantial foreign exchange reserves, the central bank may explore new strategies, such as special deposit schemes for non-resident Indians, to attract foreign currency and stabilize the rupee.
