Indian Rupee: Range trade persists against US Dollar – Societe Generale

Societe Generale strategists note that USD/INR is trading in a tight range, with robust foreign portfolio inflows into Indian debt and supportive domestic factors offset by a hawkish Federal Reserve (Fed) stance. The pair remains constrained despite the improving backdrop for Indian bonds and potential benchmark index inclusion, suggesting limited near‑term directional bias for the Indian Rupee against the Dollar.

Tight range under Fed pressure

"Elsewhere, the rally in Indian bonds shows no sign of slowing, helped by supportive measures of the RBI and MoF."

"These include (a) the appeal of foreign flows via FCNR deposits and subsidised FX hedging costs for banks raising 3–5y funds, (b) allowing ECBs for PSU lenders, and (c) removing taxes on capital gains and interest income from government securities."

"Softer oil and gold prices have also supported FPI demand for Indian debt. In addition, potential inclusion of Indian FAR bonds in the Bloomberg Global Aggregate Index at the mid‑2026 review, after a deferral in January on operational and infrastructure concerns, points to a brighter outlook."

"Meanwhile, USD/INR is maintaining a tight range of 94.15-94.95 hawkish Fed view negates the tailwinds mentioned above as well as robust FPI inflows into debt securities."

"Even a 1% weight for Indian debt in this benchmark gauge could result in $25bn-$30bn FPI inflows in the next 12 months. The 10y IGB yield has eased to 6.75%, just 9bp away from pre‑war levels after peaking near 7.143%."

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