Indian Rupee: Rate hike path supports currency – Societe Generale

Societe Generale strategists note that the Indian Rupee (INR) rallied to its strongest level against the US Dollar (USD) since late June, helped by active RBI intervention and sizeable FX mobilisation flows. They highlight stronger-than-expected 2Q Gross Domestic Product (GDP) and hawkish Fed repricing as drivers of a revised Reserve Bank of India (RBI) rate outlook, with economist Kunal Kundu now projecting three additional hikes to lift the key rate from 5.25% to 6.0%. Despite this backdrop, a Reuters Asia FX poll shows traders remain slightly bearish on INR.

RBI tightening outlook underpins INR

"The INR rallied to 94.27/USD strongest level since late June powered by active RBI intervention."

"The RBI disclosed that it raised above forecast $136.38bn through its FX mobilisation schemes (incl. FCNR) since early June."

"Following above forecast 2Q GDP (7.8% yoy vs consensus 7.3% yoy) and hawkish Fed repricing, our economist Kunal Kundu now expects the RBI to deliver three more rate hikes between now and early next year, taking key rate to 6.0% from 5.25% currently."

"Latest bi-weekly Reuters Asia FX poll shows traders have maintained a slightly bearish view on INR while bullish KRW bets have climbed to highest since 2013."

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