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INR: Rupee Sharply Declines to Fresh Low Amid Growth Concerns, RBI Intervenes

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The rupee has sharply declined to a fresh record low versus the dollar after data released after trading hours Friday showed that India's economy grew by +5.4% y/y in the July-September quarter, well below expectations of a larger +6.5% expansion and below the +6.7% recorded in the previous quarter.

  • Citing local bankers, Reuters say likely intervention by the RBI helped the rupee avert deeper losses, but the surge in the central bank's position in the non-deliverable forward market reflects the extent of pressure on the rupee and suggests that the currency will fall further.
  • The RBI meet later in the week and while the central bank moved to a neutral stance at its previous meeting, only a minority of analysts expect a rate cut at this juncture. As a reminder, RBI Governor Das sounded hawkish in November when he said the central bank will consider its job unfinished until inflation moderates around its 4% target on a durable basis. Our full preview for Friday’s decision will be released later in the week.
  • MUFG note that the rupee is likely to depreciate toward 86 per dollar by the final quarter of 2025, as less favourable economic growth will probably contribute to the weakness as it crimps inflows of foreign capital. Still, INR should fare better than its Asia peers between January and June 2025 amid US tariff increases, MUFG add.
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The rupee has sharply declined to a fresh record low versus the dollar after data released after trading hours Friday showed that India's economy grew by +5.4% y/y in the July-September quarter, well below expectations of a larger +6.5% expansion and below the +6.7% recorded in the previous quarter.

  • Citing local bankers, Reuters say likely intervention by the RBI helped the rupee avert deeper losses, but the surge in the central bank's position in the non-deliverable forward market reflects the extent of pressure on the rupee and suggests that the currency will fall further.
  • The RBI meet later in the week and while the central bank moved to a neutral stance at its previous meeting, only a minority of analysts expect a rate cut at this juncture. As a reminder, RBI Governor Das sounded hawkish in November when he said the central bank will consider its job unfinished until inflation moderates around its 4% target on a durable basis. Our full preview for Friday’s decision will be released later in the week.
  • MUFG note that the rupee is likely to depreciate toward 86 per dollar by the final quarter of 2025, as less favourable economic growth will probably contribute to the weakness as it crimps inflows of foreign capital. Still, INR should fare better than its Asia peers between January and June 2025 amid US tariff increases, MUFG add.