Indian Rupee: September gains face structural tests – Societe Generale

Societe Generale strategists highlight that the Indian Rupee’s (INR) strong start to September is reflected in a move back below the 100dma, raising questions about whether Reserve Bank of India (RBI) intervention has helped the currency turn a corner despite a hawkish Fed and higher Oil prices. The bank notes robust 2Q Gross Domestic Product (GDP) but warns that inflation dynamics and RBI’s record net short Dollar position keep the broader backdrop structurally challenging.

Rupee strength versus structural headwinds

"In EM, the strong start to September for the INR is captured by the return below the 100dma at 95.15 yesterday for the first time since July 2025."

"This raises the obvious question whether the currency turned the corner thanks to RBI intervention and can kick on from here irrespective of the hawkish Fed backdrop and higher oil prices."

"The stronger-than-expected 2Q GDP print of 7.8% yoy suggests the economy has so far weathered the external shock."

"Our economist Kunal Kundu notes that the weak GDP deflator, alongside sharply higher CPI, food prices and WPI inflation, may be overstating the underlying pace of real activity. The net short dollar position of the RBI reached a record $136.8bn at end-July, up from $103.3bn compared to June."

"In short, the broader backdrop remains structurally challenging"