Inr Stabilized by Dollar Inflows Before Potential Decline

The Indian Rupee (INR) has been bolstered by strong foreign-currency inflows linked to the RBI's special measures, notes OCBC's Christopher Wong.

The RBI's FCNR(B) window, which closed on August 31, attracted $136.4bn of foreign-currency inflows, including $127.2bn through FCNR(B) deposits.

This has significantly strengthened the RBI's FX buffer and pushed banking system liquidity to a record INR9.7tn, with its forward dollar liabilities lifted to around $137bn.

With the exceptional near-term dollar supply expected to fade, Wong suggests that there may be more two-way management from here, with the RBI potentially using periods of INR strength to absorb USD or reduce its forward exposure.