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Informist, Friday, Aug. 1, 2025

 

By Pratiksha

 

NEW DELHI – After a weak run last month, the rupee may take a breather and settle broadly unchanged from the current level at the end of August as the Reserve Bank of India is likely to keep the domestic currency from depreciating in the face of sustained foreign portfolio outflows and a strong dollar index. 

 

According to the median of estimates of 13 respondents from banks and brokerages polled by Informist, the Indian unit may settle at 87.50 a dollar by the end of August, broadly unchanged from the end of July. The rupee closed at 87.54 a dollar Friday.

 

Strong foreign portfolio outflows in July exerted downward pressure on the rupee, which depreciated 2.1% against the dollar. In July, foreign portfolio investors withdrew almost $2.15 billion from local equities. Market participants expect FPI outflows to continue this month, too, as investors have become averse to risk after US President Donald Trump Wednesday announced 25% tariff on India along with an additional penalty.

 

While Trump said, hours after announcing the tariffs, that New Delhi and Washington continue to negotiate a trade deal, market participants said the looming uncertainty and a delay in the deal will dampen investor sentiment. India's government also said Wednesday that the country is committed to concluding a fair, balanced, and mutually beneficial bilateral trade agreement with the US, which the two sides have been negotiating for the past few months.

 

"...unless trade negotiations with the US progress or foreign inflows improve significantly, we may see the rupee continuing its weak trend," Jateen Trivedi, vice-president and research analyst, commodity and currency, at LKP Securities, said.

 

Further, market participants expect the dollar index, which is strengthening after the spate of tariffs announced by Trump, to also weigh on the Indian currency. Trump announced steep tariffs on exports from multiple trading partners of the US, including Canada, Brazil, and Taiwan, ahead of his Friday trade deal deadline.

 

The tariff rollout comes amid more evidence that the levies have begun driving up prices of consumer goods in the world's largest economy. The dollar index, which measures the strength of the greenback against six major currencies, surged almost 3.4% last month. "Dollar Index is a concern and it is likely to head northwards, at least in the near term," said Gaurav Sharma, associate vice-president and head of research at Globe Capital Market Ltd.

 

With dark clouds looming, market participants are counting on the central bank to protect the Indian currency from sharp depreciation. Going by the central bank's intervention in the spot market these past few days, they hope the RBI will prevent the Indian unit from falling past the key 88-per-dollar mark. "I think RBI will come up to keep a check on the depreciating rupee. The prices may be capped," Globe Capital's Sharma said. Of the 13 poll respondents, only four expect the Indian currency to fall below the mark this month.

 

"The RBI will come and protect the rupee to prevent sharp depreciation," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "Tariff matters will get cleared and Asian currencies will reverse the course. Therefore I expect rupee to top out from here and be more range-bound and then (see) sharp appreciation in September."

 

Market participants pointed out that the RBI has robust foreign exchange reserves to spend on keeping the Indian currency in check. India's foreign exchange reserves were at $698.19 billion as of Jul. 25, not too far from the all-time high of $704.89 billion.

 

However, some poll respondents expect the central bank to keep only a light touch when intervening in the spot market to support the rupee. They see the central bank stepping in only in case of excessive volatility. "The RBI's measured intervention approach indicates that they are allowing the rupee to adjust to global realities," Trivedi of LKP Securities said. "In the absence of aggressive central bank support, the rupee could drift towards 88.25–88.50 (a dollar) before any meaningful stability returns." 

 

POLL DETAILS

 

Participant	Aug-end	Sept-end
Bank of Baroda	86.50-87.00	87.00-88.00
DCB Bank	87.00-88.00	-
Finrex Treasury Advisors LLP	87.50	86.80
Globe Capital Market	86.60	88.00
HDFC Securities	86.70-88.30	86.70-88.30
ICICI Bank	87.00-88.00	-
IDFC FIRST Bank	87.00-88.00	87.00-88.00
Kotak Mahindra Bank	87.50-88.00	-
Kotak Securities	88.00	87.00
LKP Securities	88.25	87.50
Mecklai Financial Services	87.50	86.50
Nuvama Institutional Equities	88.00-88.50	-
Shinhan Bank India	86.50-88.40	86.20-87.95
Median	87.50	87.50

 

End

 

Edited by Rajeev Pai

 

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