Mumbai |Kolkata: The rupee could grind lower to 96-97 a dollar by the end of FY27, upending central bank expectations of a potential firming in the currency's value, as persistent outflows from Indian financial assets, elevated crude oil prices, and surging global yields combine to pressure emerging markets, economists and forex specialists told ET.

Reserve Bank of India (RBI) Deputy Governor, Poonam Gupta, last week made a case for the rupee to stabilise or even appreciate, saying its depreciation over the past year and a half could prove temporary. She said the currency may have overcorrected by as much as 13% since March 2025.

Economists, however, read the math a bit differently.

Gaura Sengupta, chief economist at IDFC First Bank, said depreciation pressures persist despite a substantial balance-of-payments surplus because the surplus is largely driven by FCNR(B) inflows that the RBI has absorbed.

Excluding those inflows, the BoP was negative in the first half of FY27, reflecting weakness in other capital flows, including foreign portfolio investment, she said.

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The recent action in the currency market also points to continued pressure.

The rupee hit a record low of 96.96 per dollar in late May, following which the RBI and the government announced a series of measures to attract foreign capital. The currency subsequently recovered to around 94.50, but the gains proved short-lived, lasting only about a week in mid-June.

Depreciation pressures have since returned and intensified over the past month.

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The rupee traded largely between 95.65 and 95.95 over the past month, with heavy RBI intervention preventing it from weakening past 96, dealers said.

Intervention has also coincided with a decline in foreign exchange reserves, which fell by $14.8 billion to $765.9 billion in the week ended September 18, after touching a record $785.7 billion in the week of September 4. "Depreciation pressures on the rupee persist despite a substantial BoP surplus, because the surplus is largely due to Foreign Currency Non-Resident (Bank) inflows, which the Reserve Bank of India has absorbed. The BoP excluding FCNR(B) is negative in H1FY27, reflecting weakness in other capital flows such as FPI," Sengupta said.

Bank of Baroda chief economist Madan Sabnavis also expects the rupee to remain under depreciation pressure. "The rupee will tend to depreciate by 3-4% next year. There will be limited intervention considering the dollar will strengthen globally. This will keep imported inflation ticking," he said.

The dollar index rose to 101.2 last week from 98.8 a month prior. A stronger US currency is another source of pressure on the rupee.