Barclays (LON:) has updated its forecast for the Indian rupee, predicting a decline against the US dollar to 89.5 by the end of 2025, an adjustment from a previous target of 87.0.
The revision comes amid expectations of a stronger US dollar, overvaluation of the rupee and a policy shift by the reserve. Bank of India (NS:) (RBI).
Analysts at Barclays attribute the expected depreciation of the rupee to several factors. A “strong USD” and what they consider a “relatively rich valuation” of the INR are the main drivers.
Moreover, they cite a “looser RBI stance” and an expected reduction in portfolio flows as contributing to the rupee’s weakness.
The report also notes potential risks that could lead to further downside implications for the INR, especially if the Chinese Yuan (CNY) depreciates more than expected. The RBI’s rising forward yield and broad USD strength are seen as persistent factors likely to put pressure on the INR.
With the appointment of the new RBI governor, analysts at Barclays believe that there has been a remarkable change in policy approach. They predict greater flexibility and volatility for the INR, with the coin’s beta against the USD expected to rise.
This implies that the rupee will continue to keep pace with its peers, especially the CNY, which Barclays expects to weaken more sharply in the coming months.
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