News & analysis

While external conditions have become less punitive and domestic data supports looser monetary policy, we don’t expect the RBI to shift from its current stance of dampening volatility in USDINR given India’s upcoming index inclusions. We expect the RBI to continue sterilising capital inflows by increasing their FX reserves, and mobilising them to combat any significant depreciation pressures that may arise. Most on the street tend to agree with this conclusion, with forecasters and options markets both expecting USDINR to trade in a narrow range indefinitely. This leaves hedging the tail risk of the RBI’s management preferences changing  historically cheap.

You can read our INR Outlook in full here:



Simon Harvey, Head of FX Analysis


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