The rupee could test 94.50 against the US dollar in the near term, according to an SBI Research report. It said India’s foreign exchange reserves remain adequate but called for long-term reforms to revive capital inflows and strengthen investor confidence…reports Asian Lite News Desk
The Indian rupee could test 94.50 against the US dollar in the near term, despite the country’s adequate foreign exchange reserves, according to a report by SBI Research.
The report, released on Monday, warned that India’s balance-of-payments surplus could narrow to around $55 billion to $60 billion in the 2026-27 financial year. It said structural measures by the government would be essential to revive capital inflows and support the currency over the longer term.
SBI Research said India’s foreign exchange reserves were sufficient to meet potential contingencies, even under the most stressed scenarios. However, it highlighted the need for a combination of monetary, regulatory, fiscal and tax measures to protect the rupee and maintain investor confidence.
The report noted that withdrawing rupee liquidity could reduce the supply of the domestic currency. It also suggested that increasing the upper end of the monetary policy corridor through a higher marginal standing facility (MSF) rate could support the rupee in the short term.
The Reserve Bank of India (RBI) has already introduced several measures aimed at managing pressure on the currency and improving conditions in the foreign exchange market.
These include opening a direct dollar-supply window for three state-run oil marketing companies. The arrangement shifts an estimated $10 billion to $12 billion in monthly dollar demand away from the open spot market.
The RBI has also raised the daily cash reserve ratio maintenance requirement to 99 per cent and announced open market operation sales worth Rs 25,000 crore.
The measures form part of efforts to manage liquidity and address pressures in the foreign exchange market.
The central bank has also tightened documentation requirements for foreign exchange hedging to prevent the misuse of derivative facilities.
Under the revised requirements, authorised dealers must obtain and retain an undertaking from users entering into rupee-linked foreign exchange derivative contracts to hedge contracted exposures.
“Authorised Dealers will be required to obtain and retain an undertaking from users entering into foreign exchange derivative contracts involving INR to hedge contracted exposures, confirming that the same underlying exposure has not been hedged with any other Authorised Dealer,” the RBI said.
The central bank has additionally restricted the rebooking of cancelled foreign exchange derivative contracts as part of its efforts to ensure orderly functioning of the foreign exchange market.
SBI Research said these monetary and regulatory interventions could help protect the rupee in the short term. However, it stressed that lasting stability would require broader structural measures to encourage foreign investment and strengthen capital inflows.
The report’s assessment highlights the challenge facing policymakers as they seek to manage currency volatility while maintaining confidence in India’s economic outlook.
