The Reserve Bank of India (RBI) may permit a slight depreciation of the Rupee to correct its somewhat high real effective exchange rate and keep the currency “competitive,” according to a note from BofA Securities on Thursday.

“It supports the government's ambitions for attracting large-scale manufacturing investments,” the firm stated, going on to add it forecasts the Rupee will fall to 84 to the Dollar by the end of this year.

At the time of writing, the Rupee was trading at 83.7075, remaining close to the all-time low of 83.72 recorded on Wednesday.

Furthermore, BofA pointed out that the Rupee's trading range has weakened slightly this month, moving to 83.40-83.70, compared to the 83.0-83.5 range it maintained for much of the first half of the year, Reuters news agency reports.

India’s central bank has been keeping the Rupee within a narrow range through two-sided intervention, absorbing inflows to increase forex reserves and, as seen this week, selling Dollars to support the currency.

“We see no sign of change in (the) RBI's pursuit of a higher reserves buffer, which would limit the appreciation potential for INR,” BofA stated.

The RBI's two-sided approach has maintained the Rupee's volatility at relatively stable levels compared to historical norms.

“Over the medium term, it would be prudent for the RBI to allow higher volatility in INR. Along with the policy of building a large reserves buffer, that could create more asymmetric risks for trend INR depreciation,” BofA Securities went on to say.