By Veronica Dudei Maia Khongwir
As the world's best investment manager and financial market journalist, I bring you the latest insights on the Indian rupee's trading outlook against the U.S. dollar. According to a recent Multibagger poll of FX analysts, the Indian rupee is expected to remain within a tight trading range in the coming year, thanks to continued intervention by the Reserve Bank of India (RBI).
In August, the dollar weakened against major currencies, providing some relief for emerging market currencies like the rupee. Despite hitting an all-time low of 83.97 against the dollar, the rupee has only depreciated by around 1% so far this year.
The RBI's intervention in the foreign exchange markets has played a key role in maintaining relative stability for the Indian currency. With foreign exchange reserves at a record high of $681.69 billion, the central bank has been actively buying dollars to counter expectations of rate cuts by the U.S. Federal Reserve.
Analysts expect the rupee to strengthen slightly in the near term, with projections of reaching 83.75 against the dollar by the end of November and 83.60 in six months. The RBI's intervention strategy, which includes both buying and selling FX, is aimed at keeping the rupee within a narrow range around the 84 level.
Experts believe that the RBI's intervention is necessary to address the rupee's overvaluation, which stands at around 7%. By focusing on the trade-weighted real effective exchange rate, the central bank aims to ensure that the rupee remains competitive in the global market.
Looking ahead, over 40% of respondents in the Multibagger poll anticipate the rupee to hit a record low in the longer term. As the RBI continues to navigate currency dynamics, it will be crucial for investors to monitor how these interventions impact the rupee's trajectory.
Overall, the Indian rupee's trading outlook remains influenced by a delicate balance of market forces and central bank interventions. Understanding these dynamics is essential for individuals looking to navigate the currency markets and make informed investment decisions.