Reserve Bank of India Deputy Governor Poonam Gupta stated that the rupee has room to appreciate from current levels. Speaking at a conclave in Mumbai, she noted a fair case for the currency to not just stabilize but strengthen, aligning with earlier market analyst expectations regarding capital flow measures.

The currency recently edged lower to 95.8537 as global bond yields surged. The RBI has actively intervened over the past month to support the rupee against pressure from elevated oil prices. Consequently, the currency has lost more than 6% so far this year, underperforming most peers. However, the central bank’s steps have drawn a record $133 billion from India’s diaspora, surpassing optimistic estimates and providing a larger reserve to defend the currency while removing excess liquidity.

Gaura Sengupta, an economist at IDFC First Bank, noted that high US yields and AI capex cycles in the US make it difficult for emerging markets to attract capital, suggesting mild depreciation pressures may persist near-term. Despite this, Gupta expects the balance of payments to improve as efforts to reduce dependence on imported crude oil take effect and oil prices stabilize. She anticipates the capital account could turn more favorable later this financial year, driven by strong GDP growth, strengthening bank balance sheets, and the potential inclusion of Indian bonds in global indices.