Business · India Bureau
Rupee depreciation to accelerate in second half of FY27: Economist
The Indian rupee is projected to weaken further against the US dollar in the latter half of the fiscal year, as the Reserve Bank of India adopts a more selective approach to currency interventions. The shift is expected to trigger upward movements in the yield curve, according to analysts.
LSN India ·
The rupee faces sustained depreciation pressure in the second half of FY27, with the Reserve Bank becoming increasingly choosy about when and how much to intervene in currency markets, according to Gaura Sengupta, chief economist at IDFC First Bank.
The selective intervention strategy reflects a recalibration of RBI priorities amid broader macroeconomic headwinds. Rather than attempting to arrest every rupee movement, the central bank is expected to focus its efforts on curbing excessive volatility while allowing the currency to adjust to market fundamentals.
The anticipated rupee weakness is likely to coincide with upward shifts in the domestic yield curve, as investors recalibrate expectations around inflation, monetary policy, and capital flows. Such movements typically compress valuations across fixed-income securities while supporting import costs.
The rupee has faced persistent selling pressure from foreign portfolio outflows and widening current account pressures. The shift in RBI's intervention posture signals acceptance that some degree of currency depreciation may be inevitable and potentially necessary to support external stability as the fiscal year progresses.