Rupee to Remain in Rs 94.5-96 Range Despite Dollar Inflows

The Indian rupee has lost 28% of its value since January 2022, despite a rise in dollar inflows and higher foreign exchange reserves. According to a Bank of Baroda research report, the rupee is expected to remain within the range of Rs 94.5-96 per US dollar in the near term.

The report analyzed currency movements from January 2022 to June 2026 and found that large dollar inflows through FCNR deposits and external commercial borrowings (ECBs) have not translated into equivalent appreciation for the rupee. This is because these inflows have largely been added to the Reserve Bank of India's foreign exchange reserves instead of entering the market.

The report noted that RBI intervention, including spot and forward operations, has a significant relationship with rupee movements, accounting for 34% of the variation in the currency's value. However, other market factors also play a role, and the variables examined collectively account for no more than 40% of the rupee's movement.