Societe Generale cites Fed positioning and technical supports capping near-term INR appreciation despite policy measures and lower commodity prices.
The Indian Rupee’s upside remains limited against the US Dollar, with USD/INR anchored near 94.91, its 50-day moving average. Societe Generale highlights additional supports at 94.00 and 93.50, despite policy efforts to attract foreign bond inflows and a decline in oil and gold prices.
Money markets have unwound tightening expectations, with the 1-year swap rate dropping 36 basis points since the RBI’s June 5 meeting to 5.75%, while the 10-year Indian Government Bond yield eased to 6.80%. Coordinated measures by the RBI and Finance Ministry, including loans against FCNR deposits, aim to boost foreign portfolio inflows.
Potential inclusion of Indian Government Bonds in Bloomberg’s global index later this month could further support inflows. However, Fed positioning is expected to offset these factors, constraining near-term Rupee gains.