New Delhi [India], September 3 : The rupee is expected to trade in the range of 87.5-88.5 against the US dollar in the near term, while strong macroeconomic fundamentals are likely to support the domestic currency in the long run, according to a report released by Bank of Baroda.
The report stated, "We are anticipating a range of 87.5-88.5/USD in the near-term. Over the longer term, we continue to believe that robust macro-fundamentals should support the domestic currency."
The Indian currency depreciated to a record low in August 2025 as additional US tariffs came into effect. Month-end demand from importers and sustained foreign portfolio investor (FPI) outflows from domestic equity markets further contributed to the weakness in the rupee.
The currency declined by 0.7 per cent in August. However, when seen in the context of a weaker dollar, the fall in the rupee appeared more pronounced, the report highlighted.
The near-term outlook in the report also shared that some pressure on the rupee may persist as investors await clarity on the impact of tariffs and developments surrounding trade negotiations.
The Reserve Bank of India (RBI) is likely to intervene only to curb sharp volatility in the exchange rate, with a higher tolerance level for a weaker domestic currency.
More recently, the rupee crossed the 88-per-dollar mark, touching another record low. According to the report, this largely reflects a deterioration in investor confidence due to tariff-driven uncertainty. The imposition of a 50 per cent tariff rate has had a strong psychological impact on investor sentiment.
The US accounts for nearly 20 per cent of India's total exports, and a 50 per cent tariff on outbound shipments could potentially weigh on the country's growth outlook.
The report also noted that this factor is one of the key reasons behind investor nervousness and short-term pressure on the rupee.
At the same time, the report added that while RBI's intervention in the forex market has been relatively low by historical standards, the Central bank is expected to ensure that the depreciation in the domestic currency remains gradual and orderly.
It stated, "While low by historical standards, RBI intervention in the forex market is likely to ensure that the movement in the domestic currency is orderly and gradual."
Given these developments, the report projects the rupee to remain in the 87.5-88.5 per dollar range this month, before stabilising over the long term on the back of India's strong economic fundamentals.
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