The Indian Rupee (INR) has recently been bolstered by substantial foreign-currency inflows, largely attributed to the Reserve Bank of India's (RBI) special measures, according to OCBC’s Christopher Wong [1]. These inflows amounted to US$136.4 billion, with US$127.2 billion coming specifically through FCNR(B) deposits, materially strengthening the RBI’s foreign exchange buffer [1]. As a result, banking system liquidity reached a record INR9.7 trillion, and the RBI’s forward dollar liabilities rose to approximately US$137 billion [1].
However, the FCNR(B) window closed as of August 31, signaling that the exceptional near-term dollar supply supporting the INR is expected to fade [1]. Wong suggests that this shift may lead to more two-way management by the RBI, with the central bank potentially absorbing USD or reducing its forward exposure during periods of INR strength, rather than allowing unchecked appreciation [1].
On the technical front, USD/INR closed at 94.50, with bearish momentum remaining intact on the daily chart. Nevertheless, the Relative Strength Index (RSI) has fallen to oversold conditions, indicating that the pace of decline may moderate [1]. Key support levels are identified at 94.30 and 94.15 (June low), while resistance is noted at 96.74 (76.4% Fibonacci retracement) and 95.10 (61.8% retracement of the June low to July high) [1].
No explicit market reactions or analyst opinions regarding future INR performance beyond the technical outlook and RBI's potential management strategies are provided in the source [1].
CONCLUSION
The Indian Rupee has benefited from record dollar inflows driven by RBI’s special measures, but with the FCNR(B) window now closed, this support is expected to diminish. Technical indicators suggest a moderation in the pace of INR appreciation, and the RBI may shift to more active management of currency movements. Market participants should watch for changes in RBI strategy and liquidity conditions as the exceptional dollar supply fades.