Barclays (LON:BARC) updated its forecast for the Indian Rupee, projecting a decline against the US Dollar to 89.5 by the end of 2025, adjusting from a previous target of 87.0.
The revision comes amid expectations of a stronger US Dollar, the Rupee's overvaluation, and a policy shift by the Reserve Bank of India (NS:BOI) (RBI).
Analysts at Barclays attribute the anticipated depreciation of the Rupee to several factors. A "strong USD" and what they consider "relatively rich valuation" of the INR are primary drivers.
Additionally, they cite a "looser RBI stance" and an anticipated reduction in portfolio flows as contributing to the Rupee's weakness.
The report also notes potential risks that could lead to further downside for the INR, especially if the Chinese Yuan (CNY) depreciates more than expected. The growing RBI forward book and broad USD strength are seen as ongoing factors likely to exert pressure on the INR.
With the appointment of the new RBI governor, Barclays analysts believe there has been a notable change in policy approach. They forecast increased flexibility and volatility for the INR, with the currency's beta to the USD expected to rise.
This implies the Rupee will move more in tandem with its peers, particularly the CNY, which Barclays anticipates will weaken more sharply in the coming months.
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