Informist Poll
Rupee seen up at 85.50/$ by Jul-end on FX inflows, weak dlr
This story was originally published at 06:00 IST on 2 July 2025
Register to read our real-time news.Informist, Tuesday, Jul. 1, 2025
By Gowri Lakshmi
MUMBAI – After logging its biggest weekly rise in over two years last week, the rupee is set to keep the momentum going and strengthen against the US dollar in July, primarily driven by foreign fund inflows and the sustained weakness of the dollar index, market participants said.
According to the median of estimates by 13 banks, brokerages, and corporates polled by Informist, the Indian currency is seen rising to as much as 84.50 a dollar, and may close this month at 85.50 per dollar. The rupee had ended June at 85.7550 a dollar. On Tuesday, the first day of July, the Indian currency rose to settle at 85.5200 against the greenback.
"The rupee is likely to appreciate, supported by favourable domestic fundamentals such as robust growth and an inflation print under control," Alok Singh, Group Head Treausury at CSB Bank said. "With the end of its easing cycle (by the Reserve Bank of India) and weak economic data from the US, the rupee could strengthen further, potentially breaching the 85.10 mark by August."
The market is now bracing for the Jul. 9 tariff deadline of US President Donald Trump. Market participants are optimistic about an India-US trade deal, with most expecting the complete deal to be agreed upon later in the year, while an interim deal is expected before the tariff pause deadline ends. "The uncertainties about the deal is not a trigger for the rupee," a dealer at a foreign bank said. "The uncertainties are already factored in and the deal will definitely happen. The statements that Mr. Trump comes up with is just his strategy."
Market participants expect foreign fund inflows, especially into initial public offerings of domestic companies, to continue supporting the rupee in July. The positive impact of overseas investment flows into domestic IPOs was best seen last week, when the Indian rupee appreciated 1.3% against the greenback. A major factor in lifting the Indian currency in the week ended Jun. 28 was foreign fund inflows into the HDB Financial Services Ltd.'s IPO. This IPO alone attracted overseas flows of around $7 billion into the Indian market, thus supporting the rupee.
"There are several IPOs lined up in July, the rupee movement will be flow driven largely," Dilip Parmar, currency analyst at HDFC Securities said. "Moreover, the dollar index continues to be weak, and overall, every fundamental is in support of the rupee."
A weak dollar, as it begins to lose its safe-haven sheen amid heightened global uncertainties, is also expected to support the rupee significantly. The dollar index, which measures the strength of the greenback against a basket of six major currencies, hit an over-three-year low of 96.38 on Tuesday as investors were worried over rising US government debt as Trump tries to push its tax-cut and spending bill. After passing from US Senate, the bill, which is expected to add around $3.3 trillion to US debt, will now be presented in the House of Representatives again for the final approval. Trump aims to make it an Act by Jul. 4, the Independence Day.
In June, the dollar index fell 2.7%, with a sharp fall of nearly 12% this calendar year. The dollar has been weakening since Donald Trump took charge in January. The dollar index had ended December at 108.48, and has fallen to around 96.92 Tuesday.
Market participants also look forward to the monetary policy decision by the US Federal Open Market Committee meeting, scheduled Jul. 29-30, where Fed Funds futures traders priced in a 80.9% probability of the US Fed holding the benchmark rate at 4.25-4.50%. However, some traders are hopeful that the US Fed will reduce the benchmark rates by 25 basis points at its July meeting amid a softening labour market and as fears of recession loom after a slew of weaker-than-expected US economic data recently.
On the crude front, market participants largely do not expect it to pose any major threat to the rupee. However, should geopolitical conflicts around the globe, especially in and around crude producing nations, flare up, crude oil prices could rise sharply in short term. This could provide a temporary shock to the rupee, but overall, such shocks do not seem to push the rupee down much, as per market participants.
Crude oil prices, after shooting up to $81.38 per barrel on Jun. 23--the highest in over five months, quickly came down and were trading around $67 per barrel on Tuesday. Crude oil prices shot up last week after the US joined Israel in its attacks on Iranian nuclear facilities. Market participants said, crude oil prices may not increase sharply as there are expectations of a rise in crude output by the Organization of the Petroleum Exporting Countries in August. This could, at least partly, offset any upside risks to crude prices, market participants said. A report by Reuters suggests that the oil cartel, at its meeting on Jul. 6, may decide to raise its crude output in August by around 411,000 barrels per day.
In the past few months, the volatility in the dollar/rupee rates has increased. This is especially the case since December when the RBI had its new governor in place. Market participants attribute the wider intraday movement of dollar/rupee to a shift in the policy of the central bank. RBI governor Sanjay Malhotra, most recently on Jun. 6, said that the central bank does not target any level or any band. However, it tries to counter any "abnormal volatility...and let the prices be determined by the market."
Market participants expect the RBI to continue with its "hands-off" strategy in the foreign exchange market. "RBI's FX strategy is good, they have been managing well. They are letting the rupee move freely and whenever the market allows for opportunity, they buy or sell," Parmar said.
Some market participants expect the rupee to appreciate significantly above 85 per dollar, due to positive domestic macro-environments and likely foreign fund inflows, coupled with a weak dollar. However, a surprise geopolitical conflict could spoil the party for the rupee.
POLL DETAILS
|
Participant |
Jul-end |
Sept-end |
| Bandhan Bank | 85.00-86.00 | -- |
| Bank of Baroda | 85.25-86.25 | -- |
| CR Forex | 86.20 | -- |
| CSB Bank | 85.35 | 85.10 |
| Federal Bank | 84.75-86.25 | -- |
| HDFC Bank | 85.00-86.00 | -- |
| HDFC Securities | -- | 86.00 |
| ICICI Bank | 85.50 | -- |
| IDFC Bank | 86.00 | -- |
| Karur Vysya Bank | 85.20 | -- |
| Shinhan Bank India | 84.60-86.50 | 85.20-86.80 |
| State-owned bank | 86.00-86.50 | -- |
| UCO Bank | 84.50-85.50 | 85.10-85.20 |
|
Median |
85.50 | 85.58 |
End
US$1 = INR 85.5200
Edited by Deepshikha Bhardwaj
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