Indian Rupee: RBI support offsets wider trade gap – Societe Generale
Societe Generale notes India’s headline CPI rose slightly to 4.45% year-on-year in July, backing the RBI’s decision to keep policy unchanged. The central bank has reportedly been active in FX markets as the trade deficit widened.
Societe Generale highlights that India's headline Consumer Price Index (CPI) increased slightly to 4.45% year-on-year in July, supporting the Reserve Bank of India (RBI) decision to maintain policy stability. The central bank is believed to have engaged in foreign exchange markets as the trade deficit expanded. Rising oil and gold prices offset the impact of the Federal Reserve's measured rate hikes, while foreign investments in Indian government bonds contributed to INR support.
India's headline CPI rose modestly to 4.45% year-on-year in July from 4.38% in June, reinforcing the RBI's decision to keep policy unchanged. Simultaneously, the RBI reportedly remained active in FX markets as the trade deficit widened to $31.98 billion in July from $30.4 billion in the previous month. Stronger oil and gold prices helped counteract the dovish shift in expectations regarding Fed policy.
Non-resident investors deposited $2.5 billion into Indian Government Bond (IGB) securities in August, further bolstering the INR.
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