The rupee is likely to witness more pressure in the short term which may push the currency further beyond Rs 84 against the dollar, but it will not accord an advantage to the country’s exports, according to experts.

“In the near term, it will stay in the Rs 83.75 to Rs 84.25 (against the dollar) range over next one month. Upward pressure yesterday was due to carry trade unwind. RBI (Reserve Bank of India) intervention yesterday focused on limiting depreciation pressures,” said Gaura Sengupta, chief economist, IDFC First Bank.

The rupee fell to its lowest level of Rs 83.96 against the dollar on August 6 but had recovered a bit in early morning trades.

Sengupta noted that export performance will be more a function of external demand rather than rupee depreciation, which would make Indian goods cheaper for foreign buyers.

The currency, as per Bloomberg data, has depreciated 0.87 percent since the start of 2024 and 1.5 percent over the previous 12 months.

“Technically imports will become costlier in domestic currency terms due to a weaker rupee, but given the moves aren’t large, I don’t expect a significant impact on the import bill,” said Dhiraj Nim, FX strategist, ANZ.

A Moneycontrol analysis shows that despite Tuesday's fall, the rupee's depreciation since the start of the year was still less than the currencies of competing economies like Vietnam and Indonesia.

As on August 6, the Vietnamese dong was down 3.6 percent since the start of the year and 5.9 percent over the previous year.

The Indonesian rupiah has depreciated 4.5 percent year to date and 6.5 percent since August 2023.

The dollar index, which measures a basket of currencies against the greenback, has risen 0.8 percent since the start of 2024, representing a strengthening dollar.

Economists also note that other currencies have been more volatile than the rupee, also limiting its influence on exports.

“Exports may not get an advantage as all currencies are volatile. Plus, the West Asian and Bangladesh crises have added to uncertainty,” said Madan Sabnavis, chief economist, Bank of Baroda.

Up or down?

While economists concur that the Indian currency will likely stay under pressure in the near term, they differ on its long-term outlook.

“Given the political uncertainty and economic volatility, the rupee is expected to be at elevated levels,” said Paras Jasrai, senior analyst, India Ratings and Research.

“We expect the Indian rupee to average 84.7 to a dollar in FY25. There has been a depreciation of 3.5 percent during FY20-FY24. However, we expect a lower depreciation to the tune of 2.3 percent in FY25, given the better flows from bond inclusion,” Jasrai added.

India debuted on the JPMorgan Bond Index in June. It will be included in Bloomberg’s emerging market index starting 2025.

Sengupta, however, believes that the currency is likely to settle higher against the dollar.

“Over the medium term, we expect USD/INR to settle in the 83.50 to 84 range by March 2025, supported by a rise in balance of payments surplus in the second half of FY25,” she said.