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November 05, 2018

Reckoning rupee’s reversion range

There’s a 50% chance of 71/$ by March 2019

50% chance of 71 by March 2019


The rupee has fallen sharply against the US dollar this fiscal, losing nearly 13.8% beginning April to October 31, as global headwinds multiplied and the current account deficit (CAD) widened.


On average basis, the decline is less steep at 7.4% on-year, but still much higher than the trend rate of depreciation, of ~2.5% average per year, in the last fifteen years.


So, is a course reversal possible? Indications say yes, with some correction from where we stand today on the horizon, unless global conditions turn more adverse.


  • We believe the rupee can strengthen to 71 per US dollar by March 2019. This is our base case, with 50% probability of occurrence. The falling oil prices and currency swap deal with Japan should provide some support to the rupee.
  • However, there is a 35% probability of the rupee settling at 74 per US dollar, and a 15% probability of it appreciating to our previous forecast of 68.5 per US dollar.
  • Risks are tilted on the downside because rising interest rates in the US could continue capital outflows from India, putting pressure on the rupee.