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RBI seen defending the 97 onshore rupee level in coming weeks
Societe Generale expects the rupee to trade broadly in a 94 to 97 range as RBI holds its stance and manages USD accumulation when INR rallies.
Societe Generale analysts Kunal Kundu and Galvin Chia said the Reserve Bank of India’s August policy outcome is likely neutral for the Indian rupee, citing fewer remarks on INR moves and portfolio flows than in June.
They also pointed back to RBI Governor Malhotra’s earlier comment that the rupee was not undervalued, and they view the central bank’s next steps as focused on managing the onshore level rather than changing direction.
For FX, the team expects RBI to continue defending the 97 onshore reference point, buying or accumulating dollars as INR strengthens, which they said should keep INR within a wider 94 to 97 trading band over the following weeks.
On inflation messaging, the analysts argued the RBI sounded too comfortable, saying benign core inflation points to limited demand and pricing power, while near term risks are more tied to supply shocks, food and energy pressures, imported cost effects, and firming expectations.