Rupee's Depreciation Path Remains Elevated Amid RBI Intervention

The Indian rupee may continue to face depreciation pressure despite efforts by the Reserve Bank of India (RBI) to strengthen its foreign-exchange reserves. According to Systematix, a domestic brokerage firm, the RBI's measures may only delay deeper structural challenges facing the currency.

Systematix estimates that the rupee could slide by around 6.5% annually, a downward trend that has persisted for two years, with the rupee depreciating by approximately 17% against the US dollar since FY25.

The RBI's foreign-currency mobilisation measures have attracted nearly $73 billion in inflows by August 21, pushing India's foreign exchange reserves to a record $729.3 billion as of that date. However, Systematix warns that this additional buffer could be rapidly depleted if global interest rates rise sharply or capital outflows intensify.

The brokerage firm notes that the RBI's measures primarily provide a window of stability rather than resolving the underlying factors driving weakness in the rupee. Structural factors such as trade competitiveness, inflation, and policy-related issues continue to weigh on the currency, Systematix said.