Indian Rupee: RBI smoothing caps upside – Societe Generale

Societe Generale strategists describe a quiet start to Q3 for USD/INR, with the pair marginally bid but capped below its 50‑day moving average near 95.02. Reported US Dollar (USD) selling by state banks and expectations of Reserve Bank of India (RBI) smoothing operations are seen containing price action, even as softer Gold and Oil have yet to fully support the Indian Rupee (INR).

State bank flows and 50dma cap

"In India, the decision by the RBI to include ultra‑long 40y and 50y bonds in the FAR segment has materially improved their appeal. The 40y yield dropped 32bp to 7.38% and 50y 27bp to 7.45% in June."

"Overall, FPIs bought record INR418bn ($4.4bn) of IGBs via the FAR route in June, almost twice the preview monthly record of INR239bn of August 2024 – thanks to tax exemption measures and easier access to securities."

"In FX, it’s been a relatively quiet start to 3Q with USD/INR marginally bid at 94.70 this morning. Reports of dollar selling by state banks is keeping a lid on the topside."

"The pair has held below its 50dma (around 95.02) since mid‑June, and expectations of RBI smoothing operations should keep price action contained."

"That said, the supportive backdrop from softer gold (sub‑$4000/oz) and oil (below $75/b) has yet to fully filter through."

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