The rupee is expected to appreciate slightly; to hover around 85-86/USD

Deloitte economist Rumki Majumdar said the rupee is expected to recover slightly in the coming week and stabilize around 85-86 per dollar with RBI’s continued focus on local currency stability. She said that despite the RBI’s intervention and the Indian currency being more stable than others, the rupee may not see the level of 83 anymore.

The rupee hit an all-time low of 86.70 against the US dollar last week as massive foreign fund inflows and falling domestic equity markets dampened investor sentiment. On January 13, the rupee posted its biggest one-day decline in nearly two years and ended the session down 66 paise to hit a historic low of 86.70 against the US dollar. The currency’s previous record one-day fall of 68 paise was seen on February 6, 2023.

The local currency has depreciated by more than 1 percent so far in 2025, following a decline of around 3 percent in 2024 due to a strong dollar and FII outflows. The rupee closed at 86.60 per dollar on Friday.

“I was confident enough to say that six months ago the rupee could hold at 83-84, but given the uncertainty we have now it should stabilize at 85-86 against the dollar,” she told PTI.

The US President-elect Donald Trump’s swearing-in ceremony to be held on January 20 is seeing strength in the dollar. To manage extreme volatility in the forex market, the RBI has regularly stepped in by selling the US dollar in the forex market. To stop the depreciation of rupee.

As a result, India’s forex reserves declined to USD 625.871 billion in the week ended January 10 from a high of USD 704.88 billion at the end of September.

There is definitely a flight to the US and the fact that investors want to move to the safe haven has led to the dollar index rising from 97 to 108 over the past three months, she said.

However, she said, the Indian currency is more stable against the dollar than other currencies.

Observing that exporters need stability on the rate front, she said, the RBI will ensure stability as it helps them book forward contracts.

According to DK Srivastava, Principal Policy Advisor, EY, the government, in the upcoming budget, may consider levying higher tariffs on imports to counter the significant depreciation of the rupee seen in the last few months.

The noted economist argued that higher import duty would curb demand for dollars from importers and help stem the depreciation of the rupee.

The sudden depreciation of the rupee against the US dollar is posing a challenge to policy makers – the budget makers on the monetary side and the RBI on the monetary side. The expectation is that the US economy is going to recover, and therefore, many financial resources are moving to the world’s largest economy, he added.