Rupee Expected to Appreciate and Stabilize Around 85-86 Per US Dollar

The Indian Rupee is anticipated to appreciate slightly and find stability between 85 and 86 against the US dollar in the upcoming weeks. This expectation comes in light of the Reserve Bank of India (RBI)'s sustained focus on maintaining the stability of the domestic currency, according to Deloitte economist Rumki Majumdar.

Majumdar explained that despite RBI's interventions in the market, the rupee is unlikely to reach levels below 83 in the near future, indicating that the Indian currency remains more stable compared to its global counterparts.

Recently, the rupee faced a significant decline, hitting an all-time low of 86.70 against the US dollar, primarily due to substantial foreign fund outflows and a downturn in domestic equity markets, which affected investor confidence.

On January 13, the rupee experienced its steepest single-day drop in almost two years, closing the session at a historical low of 86.70 against the US dollar, down 66 paise. The previous record for a one-day decline in value was 68 paise, which occurred on February 6, 2023.

Throughout 2025, the rupee has depreciated by over 1%, following a decline of nearly 3% in 2024, impacted by a strong US dollar and Foreign Institutional Investor outflows. On the last trading day, the rupee closed at 86.60 per dollar.

Majumdar previously expected the rupee to stabilize in the 83-84 range about six months ago; however, given the current uncertainties, she now suggests a stabilization between 85 and 86 against the dollar.

The strength of the dollar has been increasing, particularly in anticipation of the US presidential inauguration, leading to volatility in the foreign exchange market. The RBI has actively intervened by selling US dollars to mitigate rupee depreciation.

This active intervention has resulted in India's foreign exchange reserves decreasing from a peak of $704.88 billion at the end of September to $625.871 billion by the week ending January 10.

Investors are showing a trend toward investing in the US, favoring safer assets, which has contributed to the dollar index rising from 97 to 108 over the past three months, according to Majumdar. However, she pointed out that the Indian rupee is still relatively stable compared to other currencies.

For exporters, predictability in exchange rates is crucial, and Majumdar emphasized that the RBI is committed to providing stability, as it aids exporters in securing forward contracts.

Additionally, EY Chief Policy Advisor DK Srivastava suggested that the Indian government could consider increasing tariffs on imports in the upcoming budget to counteract the recent significant depreciations in the rupee's value. By imposing higher import duties, the demand for dollars from importers could be reduced, helping to stabilize the rupee.

The rapid decline of the rupee presents a challenge for policymakers, particularly in formulating the budget and managing monetary policy at the RBI. Srivastava expressed his belief that the US economy is on the road to recovery, prompting the movement of financial resources toward the world's largest economy.

Rupee, Economy, Stability