Indian Rupee: Gains constrained against US Dollar – Societe Generale

Societe Generale notes that Indian money markets have continued to unwind tightening expectations, with the 1-year swap rate dropping to 5.75% and the 10-year IGB yield easing to 6.80%. Despite policy steps to attract foreign bond inflows and lower Oil and Gold prices, the bank expects limited near-term Rupee appreciation, highlighting key USD/INR supports around 94.91, 94.00 and 93.50.

Range support levels watched

"In India, money markets continued to pare tightening expectations with the 1y swap rate falling another 8bp to 5.75%. This brings the cumulative decline to 36bp since the RBI meeting earlier this month."

"The MPC meeting on 5th June also brought coordinated measures by the RBI and MinFin to boost FPI inflows into domestic bonds."

"Policy support has been rolled out further, with the RBI allowing loans against FCNR deposits for NRIs, effectively enabling leverage and improving the relative appeal of these instruments."

"Looking ahead, bond inflows could receive an additional boost if Bloomberg Index Services includes IGBs in its global index after review later this month."

"However, it is our view that FPI inflows may not translate into near‑term INR appreciation as positioning for the Fed offsets support from portfolio inflows and lower oil and gold prices. USD/INR for now is anchored by 94.91 (50dma), next supports are around 94/93.50."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)