The dollar has solid prospects for continued strength, estimating another 4-5% upside in the broad dollar trade-weighted index. He attributed this to steady US economic growth, the country’s unique resilience, changes in interest rate policies, and the impact of tariffs.
“I think we are going to be living in a strong dollar world for some time to come, and one should be prepared for that,” he said.
The Dollar Index dropped to 109.6 from 110 overnight, marking its biggest decline since January 6, 2024.
Also Read: This economist sees the rupee hitting 88 to a dollar within the next 9-12 months
Trivedi stated that the Indian rupee, which has remained relatively stable for a long time, is expected to weaken further against the dollar. However, he believes it will still outperform other emerging markets and Asian currencies over the year.
“The common theme here, from an FX standpoint, is, don’t fight the dollar. You want to be thinking about the rupee in reference to other EM currencies, in reference to other Asian currencies. We are still going to see a relatively managed and outperforming rupee, but versus the dollar, there is more weakness to come,” he said.
The rupee reached a new low of ₹86.58/$ on Monday, January 13, falling 0.7%. This 0.7% decline was the sharpest in 10 months. On Monday and today, the rupee underperformed compared to other Asian currencies. The drop in the rupee on Monday was mainly caused by a sharp rise in the dollar index and US yields.
Also Read: Standard Chartered economist sees rupee at 87.75 per dollar by end-2025
Trivedi also expects two more rate cuts during the year. The first cut in June and another in the second half of the year, driven by steady growth and inflation normalisation. He stated that the pace of rate cuts would be slower and less urgent compared to 2024.
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