The Indian rupee will trade in a narrow range against the U.S. dollar over coming months and gain slightly in a year as the Reserve Bank of India continues to intervene in currency markets, according to a Reuters poll of strategists.
Unlike most emerging market currencies, the rupee has showed remarkable stability against the dollar, thanks to the RBI's hefty foreign exchange reserves of over $619 billion, which it has used to absorb excess volatility.
The rupee lost around 0.6% against the dollar in 2023 but was up about 0.4% this year, a negligible gain for the world's fastest-growing major economy, showing how tightly the currency is being managed.
Median forecasts in the March 1-6 poll of 45 analysts forecast the rupee trading around where it was on Wednesday by month-end, 82.90/$. It was expected to gain less than 0.1% to change hands around 82.75/$ at end-May.
That outlook has been largely unchanged for several months.
"We expect USD/INR to appreciate gradually over the next few months...However, the RBI is likely to absorb these additional inflows, keeping a steady hold on INR," wrote Aditi Gupta, an economist at Bank of Baroda.
"India's robust domestic growth along with stable external macros have been underpinning the strength in INR in recent times...FPI (foreign portfolio investment) inflows and range-bound oil prices have also supported INR."
Indian stock indices hit all-time highs this month, including on Wednesday, suggesting strong demand from foreign investors for the country's assets.
The RBI is expected to cut its key repo rate by 50 basis points this year, compared to 75-100 basis points of easing due from the U.S. Federal Reserve, propping up the rupee on expected higher interest rate differentials.
Although the rupee was expected to gain about 0.4% to 82.5/$ in six months and 0.8% to 82.17/$ in a year, the range of forecasts was quite narrow just like in the previous few months. Forecasts for 12 months ranged 79.00/$-84.80/$.
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