Rupee forecast to slide toward 100 per dollar despite RBI steps

India's rupee is expected to weaken toward the end of this year and into mid-2027, with a slide to 100 rupees per dollar not ruled out, even after the Reserve Bank of India introduced fresh measures to slow its depreciation.

The currency has recovered from 96.79 rupees per dollar to the 95 level in recent days, helped by the central bank's latest steps. Strategists say that relief will be short-lived.

"The RBI is determined to do whatever is necessary to ensure orderly movement in the foreign exchange market," RBI Governor Sanjay Malhotra told the Indian outlet Moneycontrol on Tuesday.

What the RBI did

On Saturday, the central bank announced measures to make speculative bets on the rupee more expensive and to restrict the rebooking of cancelled foreign exchange derivative contracts. It also opened a special window covering the full daily dollar needs of three public sector oil marketing companies, ring-fencing that trade from spot markets.

Devarsh Vakil, head of research at HDFC Securities, told CNBC the steps offer "short-term to medium-term stability, not long-term structural support."

Hanna Luchnikava-Schorsch, head of Asia-Pacific economics at S&P Global Market Intelligence, said the measures can slow depreciation but cannot "fully offset the fundamental pressures stemming from elevated oil prices, a wider current account deficit, and a challenging global capital flow environment."

Her firm expects the rupee near 97 per dollar by end-2026 and 98 by mid-2027. Mizuho Securities expects 98 by late 2026 and early next year, according to Vishnu Varathan, its head of macro strategy for APAC.

Luchnikava-Schorsch said a move to 100 could occur "if oil prices rise further, portfolio outflows resume and the current account deficit widens beyond current expectations." Harsimran Sahni, associate director and head of treasury at Anand Rathi Global Finance, also said sustained outflows alongside high crude prices and a widening deficit could push the rupee toward that level.

Reserves under strain

The latest steps follow a June scheme, Foreign Currency Non-Resident (Bank) deposits, which offered incentives to non-resident Indians to hold foreign currency deposits in Indian banks. Nomura said the scheme lifted the RBI's reserves by $105 billion, but adverse global conditions forced "aggressive" spot-market intervention.

Since the programme closed on Aug. 30, the rupee has fallen 1.9% against the dollar, and dollar sales by the RBI cut foreign reserves by $51 billion as of Oct. 2, according to Ambit Capital. The brokerage said FCNR-B and June swap measures have created $200 billion in forward dollar commitments, reducing the RBI's effective reserve cover and "leaving the rupee vulnerable to further depreciation." India's import cover is about 6.2 months, its lowest since 2013.

India, the world's fastest-growing major economy, imports nearly 85% of its fuel and is among the countries most exposed to supply disruptions from the Iran war, with the Strait of Hormuz a key route before the conflict. Foreign portfolio investors have sold $32.5 billion of Indian equities this year through Oct. 13, NSDL data show. Prime Minister Narendra Modi urged citizens last month to avoid foreign travel and buying gold, after a similar appeal in May.

Source: CNBC Top News.