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Informist, Tuesday, Dec. 2, 2025

 

By Pratiksha

 

NEW DELHI - After depreciating almost 1% against the dollar last month, the rupee is expected to take a breather and stabilise in December, likely on the back of the Reserve Bank of India's active intervention through dollar sales. However, the depreciation bias for the Indian currency will persist given the looming uncertainty over a trade deal with the US. 

 

The Indian unit may settle at 89.58 a dollar by the end of this month, broadly unchanged from November-end, according to the median of estimates of 14 respondents from banks, corporates, and brokerages polled by Informist.

 

Even though the central bank let go of its defence of the key 88.80 per dollar mark, resulting in the rupee logging its worst day in over six months on Nov. 21, market participants expect the RBI to provide support until the proposed bilateral trade deal between India and the US is in place. 

 

In August, the US imposed steep 50% tariffs on Indian goods, half of which was a penalty for purchasing crude oil from Russia. Since then, both countries have been negotiating a trade deal, with India particularly looking at lower US tariffs on Indian goods while the US is looking for more access to the Indian market. In the latest development, India's Commerce Secretary Rajesh Agrawal Friday said the two countries are likely to agree on the framework for a trade deal within this calendar year.

 

However, the uncertainty around the trade deal has kept investors' risk appetite dampened. "Some impact of the higher tariffs is visible in the trade numbers for Oct '25, and a continued impasse can have a negative impact on both the external position as well as investor sentiments," Aditi Gupta, an economist at Bank of Baroda, said in a note. India's merchandise trade deficit in October widened to an all-time high of $41.68 billion on the back of record imports during the month. Goods exports fell the sharpest in 15 months in October on a year-on-year basis. 

 

Poll respondents said the central bank may not be comfortable with the rupee falling past the psychologically-crucial 90-per-dollar level at a time when there is a likelihood of a trade deal between India and the US. Of the 14 poll respondents, only five expect the Indian unit to decline past the 90 mark this month. In fact, the Indian currency may settle at 89.63 a dollar by the end of the current financial year ending March, according to the median of estimates of 10 respondents. 

 

Some poll respondents expect the RBI to allow the rupee to fall further, noting its recent intervention pattern in the foreign exchange market. Case in point: The rupee hit a record low of 89.9525 a dollar Tuesday as the central bank loosened its grip on the currency, dealers said. 

 

"RBI is likely to allow calibrated depreciation as conserving FX reserves appears to be a priority," said Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities. "Heavy intervention would require sizeable reserve depletion. With India facing trade-deal uncertainty and high import-driven outflows, allowing the rupee to adjust alongside global peers seems to be the preferred strategy."

 

Market participants are not too optimistic on the outlook for the rupee even if New Delhi secures a good trade deal with Washington. They expect the apex bank to make the most of any possible appreciation of the rupee after a deal is announced by stepping in to buy dollars to replenish its foreign exchange reserves.   

 

"A favourable trade deal lowering tariffs on Indian goods to 15-20% could trigger an INR rally, possibly pushing dollar-rupee down to 88.0-88.50. The RBl is expected to counter this strength and build FX reserves," ANZ Bank India said in a note. Since April, the RBI has sold about $35 billion net in the spot market and increased its net-short forward position, indicating it will seize chances to accumulate reserves whenever an opportunity arises, ANZ said. 

 

However, a silver lining for the Indian currency is likely to be the dollar index, which is losing steam amid growing expectations of a rate cut by the US Federal Reserve this month, poll respondents said. The dollar index, which measures the strength of the dollar against a basket of six major currencies, fell 0.2% last month. 

 

The RBI's Monetary Policy Committee decision on Friday will also be key for the rupee's outlook, traders said. A surprisingly sharp rise in GDP growth in the September quarter has led to divergence among participants about the interest rate decision this week, with some still expecting a rate cut. Poll respondents see a possibility for the Indian unit to fall beyond the 90-per-dollar mark, in case of a rate cut by the rate-setting panel in December. 

 

Whatever be the case, going by the current market sentiment, seems like the RBI will remain the dominant player in the currency market this month as well. 

 

POLL DETAILS

 

Participant	Dec-end	Mar-end
ANZ Bank India	-	90.00
Bank of Baroda	89.00-90.00	88.00-89.00
Finrex Treasury Advisors LLP	89.50	90.50
Globe Capital Market	88.40-90.70	-
HDFC Securities	88.80-90.40	88.50-99.90
ICICI Bank	89.80	-
IDFC FIRST Bank	88.50-90.00	87.50-90.00
Kotak Mahindra Bank	88.75-89.50	-
Kotak Securities	90.00	87.00
Large state-owned oil company	90.00	-
LKP Securities	90.75	92.50
Mecklai Financial Services	90.00	91.00
Shinhan Bank India	88.70-90.20	88.60-90.50
TamilNad Mercntile Bank	90.50	-
UCO Bank	89.30	88.60
Median	89.58	89.63

 

End

 

US$1 = INR 89.92

 

Edited by Vandana Hingorani

 

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