Indian Rupee: Reserve buffer and carry dynamics – Societe Generale
Societe Generale strategists note that India’s FX reserves surged by $44.9bn to a record $785.7bn in early September, largely due to Reserve Bank of India (RBI) mobilisation measures such as the FCNR(B) scheme.
Societe Generale strategists report that India's foreign exchange reserves reached a record high of $785.7bn as of early September, with an additional $44.9bn added, largely due to Reserve Bank of India (RBI) measures like the FCNR(B) scheme. Despite the surge, analysts anticipate a gradual slowdown in reserve accumulation, but emphasize the enhanced RBI's capacity to stabilize volatility and support the Indian Rupee (INR) due to the expanded buffer.
The widening of the INR's carry appeal is hindered by narrowing yield spreads and higher oil prices, which negatively impact India's external balance. Consequently, the RBI is under pressure to keep up with the global interest rate tightening cycle.
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