Societe Generale warns that limited RBI intervention capacity and elevated short positions could drive further USD/INR gains following last week's 1.9% rally.
Societe Generale strategists indicate that the Indian Rupee faces significant downward pressure as RBI intervention capacity is increasingly constrained by declining FX reserves. With INR shorts reaching multi-month highs and the RBI's ability to supply USD directly to oil importers limited, the pair is positioned for further upside despite recent state-run bank selling.
FX reserves have dropped sharply, limiting the central bank's ability to supply USD directly to oil companies.
Market sentiment is bearish, evidenced by INR shorts in the Reuters poll reaching multi-month highs.
The Indian Rupee faces renewed downward pressure as Societe Generale strategists highlight constrained RBI intervention capacity. With FX reserves declining and short positions at multi-month highs, the USD/INR pair remains supported despite recent state-run bank selling.
The INR is struggling due to concerns over the RBI's ability to intervene in the market, exacerbated by falling FX reserves and high levels of speculative short positioning.