BENGALURU, March 6 (Reuters) – The Indian rupee will weaken more against the U.S. dollar over the coming year than previously thought on escalating fears of a U.S.-led global trade war and a slowing domestic economy, a Reuters poll of FX analysts found.
Analysts said expectations for a short and shallow interest rate-cutting cycle by the Reserve Bank of India are likely to exert further mild downward pressure on the rupee.
While the greenback has dropped about 3% this year, the partially-convertible rupee has not made the same recovery, flipping from one of Asia’s best-performing currencies in 2024 to one of the worst this year.
Foreign investors have dumped over $14 billion of Indian shares from Mumbai’s formerly high-flying stock market in just the first few months of this year.
With no let-up in sight for U.S. President Donald Trump’s appetite for threatening and levying tariffs on trading partners, and tensions with India likely, pressure on the rupee may persist.
Already down over 1.6% this year, the rupee was forecast to drop over 1% to 87.88 per dollar in three months, according to a median forecast of 32 foreign exchange analysts in a March 3-5 Reuters poll.
It will then trade at 87.92 in six months and down around 1.4% from now to 88.30 by end-February 2026, poll medians predicted. The currency fell about 3.0% in 2024.
This marks one of the biggest downgrades for the three-month outlook in the FX poll in over a year. The currency declined for a seventh consecutive year in 2024, and if the latest forecasts hold, this downturn will mark the longest losing streak in over two decades.
“Growth concerns, reciprocal tariffs and general U.S. trade policy fears are likely weighing on the rupee,” said Saktiandi Supaat, head of FX research at Maybank.
“We initially expected the rupee would be more resilient to potential Trump trade policies. However, the situation has changed with Trump’s threats of reciprocal tariffs, which could potentially hurt India.”
The RBI has intervened in foreign exchange markets to prevent a steep slide in the rupee, but less so since late December 2024, following the appointment of new RBI Governor Sanjay Malhotra.
Analysts said this has allowed the rupee to weaken further.
“Despite a slowdown in inflows, substantial RBI intervention limited the depreciation pressures on the currency. Even when capital inflows improve, the RBI will absorb those inflows because they have to rebuild their FX reserve,” said Gaura Sengupta, chief economist at IDFC First Bank.
