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Home.forex news reportRupee ends weaker, banks lower forecasts citing persistent headwinds

Rupee ends weaker, banks lower forecasts citing persistent headwinds

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The Indian rupee weakened on Thursday, as dollar demand from foreign banks and importers outweighed the impact of softer U.S. bond yields while likely intervention by the central bank capped losses.

Multiple banks have slashed their rupee forecasts for 2025 over the last week following a sharp decline in the currency as a rising dollar pummelled emerging market assets.

The banks have cited a perceived shift in India’s forex intervention strategy while lowering their forecasts.

Bank of America expects the rupee to weaken to 88 by mid-2025 while Barclays sees it declining to 89.50 by the end of the year.

The currency has weakened about 3% since Donald Trump‘s victory in the U.S. elections sparked a wave of dollar strength.

Concerns about India’s slowing growth and a widening trade deficit have also added to the pressure. Foreign investors have pulled out nearly $5.5 billion from Indian stocks and bonds so far in January, adding to the pressure, which has precipitated the rupee’s sharp decline, a contrast to its relative stability over the previous two years. “The heavy interventionist stance that kept USD/INR in a tight range for much of last year has given way although we do not expect the RBI to simply pull out of the market, but rather smooth any depreciation in line with regional peers,” Barclays analysts said in a note on Thursday.

Standard Chartered, too, has lowered its rupee forecast for the end of the year to 87.75 from 85.50 earlier.

The currency’s sharp decline could delay rate cuts by the Reserve Bank of India on the back of worries about imported inflation, analysts said.

The rupee closed at 86.55 on the session, down 0.2% from the previous close.

The dollar index was steady near 109 while Asian currencies were mostly rangebound.



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