The Indian rupee has recently shown some recovery, moving from 96.79 to around 95 rupees per dollar, thanks to interventions by the Reserve Bank of India (RBI). However, analysts predict that this relief will be temporary, with expectations of the rupee depreciating to approximately 97 rupees by the end of 2026 and 98 rupees by mid-2027.
Key factors contributing to this outlook include elevated oil prices, a wider current account deficit, and ongoing foreign capital outflows, which have seen foreign portfolio investors sell $32.5 billion in Indian equities this year.
The RBI has implemented measures to curb speculative trading and support public sector oil companies, but these are seen as providing only short- to medium-term stability. The RBI's interventions have also led to a significant decline in foreign reserves, which fell by $51 billion as of October 2.
With India's heavy reliance on imported fuel and the geopolitical risks stemming from the Iran war, the rupee remains vulnerable. Analysts warn that if oil prices continue to rise and capital outflows persist, the rupee could indeed approach the 100-per-dollar mark, prompting businesses to enhance their hedging strategies against currency fluctuations