Global investors are anticipating further depreciation of the Indian rupee, with some projecting a fall to 100 per dollar. According to reports from The Economic Times, firms including Aberdeen Investments, MetLife Investment Management and Gamma Asset Management SA say the rupee hitting three digits versus the greenback remains a possibility. As reported by Gamma Asset's Rajeev De Mello, the rupee remains vulnerable to further depreciation, with 100 against the dollar being an important psychological threshold that investors will increasingly focus on. The most immediate catalyst for a break of this level would be another leg higher in oil prices.
The rupee's decline has been compounded by the US-Iran conflict, which has pushed up India's oil import bill and driven investors toward the greenback. According to The Economic Times, the oil shock has since stoked speculation over how far the currency could fall. The UN Conference on Trade and Development has stated that the European Union, as a net importer of oil, will face a higher oil import bill as it prepares for the 2026-2027 heating season. While demand for fuels in the region has become more elastic since 2022 making the displacement of other import segments less likely, the energy shock confronts Europe with the potential of sustained price increases. Escalating oil prices are thus keeping a lid on the Euro right now, with EUR/USD pair pulling back to 1.1606 today, testing its lowest level in six weeks.
Bank economists are revising their forecasts as pressure on the rupee mounts. As reported by The Economic Times, Kotak Mahindra Bank now sees the currency trading between 93 and 99 per dollar. Australia and New Zealand Banking Group expects the rupee to weaken to 97.5 by year-end, from an earlier forecast of 93, while HSBC Holdings Plc has lowered its target to 95.5 from 93.5. Not everyone sees a one-way slide, with the Amundi Investment Institute noting that Asian currencies have become cheaper after broad declines, raising the scope for a rebound.
Global funds have adopted defensive positions amid the currency volatility. According to The Economic Times, both Aberdeen and Gamma Asset have been underweight on the rupee, while Neuberger Berman Group LLC said it is not looking to add positions currently. Edwin Gutierrez from Aberdeen noted they have been on the bearish side in terms of resolution of the Iran conflict and expected higher for longer oil, which naturally is negative for India. Investors are also watching how aggressively the Reserve Bank of India would respond if the currency nears 100, with some saying a rapid slide could prompt heavier intervention. On NSE, EUR/INR futures are quoting at 112.51, up marginally on the day amid mostly choppy trades.
