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RBI seen loosening stranglehold on rupee in 2025
The Reserve Bank of India might have to adjust its foreign exchange strategy as the rupee is overvalued. This could lead to a weaker and more volatile rupee by 2025. Factors such as the U.S. Federal Reserve's rate cut cycle, Donald Trump's trade policies, US bond yields and India's economic slowdown will impact the rupee.
MUMBAI: The Reserve Bank of India will need to rethink its foreign exchange strategy and loosen its hold on the rupee in 2025, economists said, with the currency at its strongest against peers in at least two decades in trade-weighted terms.
The rupee's 40-currency trade-weighted real effective exchange rate (REER) stood at 108.14 in November, indicating the currency was overvalued by around 8%, the Reserve Bank of India's latest bulletin showed.
The rupee's overvaluation relative to its trading partners makes India's exports more expensive. This is the most overvalued the rupee has been since 2004, RBI data showed. Data prior to 2004 is not available.
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