The Indian rupee fell by only 0.2% vs the US dollar in August as opposed to the average decline for Asian currencies of -1.2%. Although the USD/INR pair is still expected to rise, the strong economic performance is set to cushion INR's weakness.

Strong economic recovery is helping to stabilize INR

“Softer inflationary pressures will definitely be welcome news for RBI. The market is still pricing in another 25 bps hike before year-end. The strong economic recovery is helping to stabilize INR.”

“The bias is still tilted to the upside for USD/INR but the strong economic performance could help constrain INR weakness.”