The Indian rupee is likely to remain in the ₹94.5-96 per US dollar range in the near term, according to a comprehensive analysis by Bank of Baroda, as reported by The Times of India. Large dollar inflows through FCNR deposits and external commercial borrowings (ECBs) have failed to translate into commensurate appreciation as the funds have largely been added to the Reserve Bank of India's reserves. The rupee's movement has increasingly been shaped by a combination of fundamentals, RBI intervention and market sentiment, making it difficult to attribute currency movements to any single factor. Sharp appreciation of the rupee, which could theoretically have followed the increase in dollar inflows, has been limited as the inflows have not been infused into the market but added to reserves. The rupee had been weakening for the past couple of days due to high dollar demand from importers, who were mopping up the US currency ahead of a likely bank strike to secure month-end payments.
A comprehensive analysis by Bank of Baroda has revealed that the rupee's movement over the past four years reflects a complex interplay of fundamentals, RBI intervention and market sentiment, making it difficult to attribute currency moves to any single factor. Since the eruption of the Ukraine war in 2022, the rupee has moved from an average of ₹74.44 per dollar in January 2022 to an average of ₹95.47 per dollar in August 2026, a depreciation of around 28%. Over the same period, the dollar gained 2.4 per cent against the euro, while the yen, Indonesian rupiah and South Korean won depreciated by 38 per cent, 24 per cent and 17 per cent, respectively. The report analysed monthly currency movements from January 2022 to June 2026 using changes in forex reserves, RBI spot and forward market operations, FPI flows and the dollar-euro exchange rate. Among the variables studied, RBI intervention through spot and forward operations showed a significant relationship with rupee movements, with the two operations having an explanatory power of 34 per cent when used together. The report's analysis found that the variables studied explained no more than 40 per cent of the variation in the rupee, indicating that a substantial portion of the movement remained outside what the analysis could capture.
The Reserve Bank of India is expected to step in as the rupee weakens toward 96, with traders anticipating intervention to support the currency, as reported by The Times of India. Persistent intervention by the RBI have, however, contained pressure on the rupee, with the central bank using sell-buy swaps to mop up excess rupee liquidity from the banking system. Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, expects the Reserve Bank to lean against the move closer to 96, as reported by The Hindu BusinessLine. India's economic adjustment remains controlled, backed by foreign exchange reserves close to $781 billion and strategic policies that have cushioned the domestic economy from global energy price shocks, providing additional support for currency stability. The rupee remained above the key psychological barrier of 96 per dollar, demonstrating resilience despite persistent dollar demand from domestic importers, particularly oil companies. The report's findings suggest that the RBI's use of both spot and forward operations together could be more effective in managing the currency, with the combined explanatory power of 34 per cent.
Indian shares fluctuated before finishing modestly higher on Friday, as a sell-off in government debt eased and oil prices retreated from recent highs following reports that Iran has submitted a proposal to the United States to end their war and reopen the Strait of Hormuz within seven days, as reported by Business Standard. The BSE Sensex closed at 73,895.74 (up 315.20 points or 0.43%) and the NSE Nifty 50 ended at 23,140.50 (up 77.40 points or 0.34%). Foreign Institutional Investors (FIIs) offloaded equities worth ₹5,027.36 crore on a net basis on Thursday (September 24), according to exchange data. The one-year forward premium increased to 3.5%, a level not seen since the last week of May, indicating growing expectations of rupee appreciation. Anuj Choudhary from Mirae Asset Sharekhan expects the rupee to trade with a slight positive bias on improved global risk sentiment amid optimism over the proposed U.S.-Iran phased deal to reopen the Strait of Hormuz and the end of the U.S. blockade. The USD/INR spot price is expected to trade in a range of ₹95.60 to 96.10, according to his analysis.
