November blues: Rupee likely to trade close to 89 amid trade uncertainty, strong dollar

Indian rupee

The outlook for rupee remains weak in November, with experts expecting it to plunge to new lows amid persistent foreign funds outflows, dollar demand from oil importers and global economic uncertainty.

They also expect the Reserve Bank of India (RBI) to stay active in the currency market to prevent a sharp drop.

The rupee is likely to slip to a record low in the coming days, with USDINR expected to trade in the 88.30–89.25 range during the month, Dilip Parmar, foreign exchange analyst at HDFC Securities, said.

“The outlook for the rupee remains weak,” Parmar said, pointing to foreign fund flows, the central bank’s intervention strategy, India’s trade balance data, and movement in Asian currencies as key factors to watch this month.

While the RBI does not target a specific exchange rate level, it may alter its intervention strategy, he said. “The RBI may trim its dollar short positions in forwards and shift the tenure from near-term to longer-term amid trade uncertainty and foreign fund outflows,” Parmar said.

The demand for dollar continues to exceed supply, and even if a trade deal materialises, any rupee gains are likely to be short-lived, Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, said. He was referring to a trade deal with the United States, which if agreed to could lower tariffs on Indian goods.

The Trump administration has slapped a 50 percent duty on imports from India, which is the highest in the world.

“Imports are still higher than exports. Oil companies, defence payments, and loan repayments are all creating steady dollar demand,” Bhansali said.

The RBI remains both a key supplier and buyer of dollars, supplying liquidity in the spot market but also adding to reserves.

The central bank might be defending the 88.80 level to maintain stability until the proposed trade deal with the US is finalised, he said. He warned that “if foreign portfolio outflows continue and dollar demand stays high, the RBI may eventually let the rupee slip beyond that level”.

The US and India have held several rounds of trade talks in the last few months.

On November 4, the RBI intervened in the NDF market to defend rupee from depreciating sharply and touching record low. This makes the rupee to appreciate and perform a better in over two weeks.

Abhishek Goenka, Founder & CEO of IFA Global, said that after showing some resilience through mid-October, the rupee has again come under pressure due to oil-related dollar buying and renewed FPI outflows.

“The RBI was likely active through state-run banks near the 88.80 mark, cushioning the pace of depreciation,” Goenka said.

Goenka added that intervention in the forward market has provided secondary support, though spot levels remain weak amid muted capital inflows and a firm U.S. dollar backdrop.