“Over the medium term, the rupee will still depreciate because that depreciation is a function of multi-year high US Treasury yields and crude oil at $100,” said Gaura Sengupta, chief economist at IDFC FIRST Bank. “That dynamic has not changed. Maybe the pace of depreciation will be softer because increasingly it looks like RBI is taking stronger measures. So, maybe more measures are in store.” Sengupta expects the rupee to trade in the 96.50-97 range by the end of March.
A weaker rupee makes imports more expensive, adding to inflationary pressures and potentially weighing on economic growth by raising input costs for businesses and squeezing household purchasing power. India is particularly vulnerable because it imports about 90% of its crude oil requirements, making the currency’s weakness an added burden when global oil prices are elevated.
