Rupee Soars Amid $136 Billion Foreign Exchange Inflow
The Indian Rupee has strengthened against the US Dollar, rising to near 94.28 on Thursday. This increase is largely due to significant inflows of foreign exchange through the Reserve Bank of India's (RBI) Foreign Currency Non-Resident (B) deposits window.
According to a Reuters report, India attracted $136.38 billion through special foreign-currency mobilisation schemes, exceeding expectations. The RBI has credited this influx with helping to contain pressure on the Indian currency.
The US Dollar Index (DXY), which measures the Greenback's value against six major currencies, fell sharply on Wednesday and continued its decline on Thursday, reaching 99.28 in the Asian session. This weakness is attributed to soft private labor data from the US, with a report showing that the private sector created fewer than expected jobs in August.
Analysts at Societe Generale note that India's strong economic growth, with a reported real GDP of 7.8% in Q2, has narrowed the room for the RBI to remain dovish on monetary policy. They caution, however, that principal downside risks include a sharp reversal in food and energy prices or evidence that the exceptional GDP print overstates underlying demand momentum.
The technical analysis suggests that USD/INR is likely to see more downside, potentially reaching near 94.15 as it remains below the 20-period exponential moving average at 95.32.