MUFG Daily Update: INR Rates Likely to Rise with Strong India GDP Growth

India's Q1 GDP expanded 7.8% YoY, topping expectations and reinforcing MUFG's view that INR rates will grind higher and supporting their pay INR 5y NDOIS trade. Meanwhile, global markets are digesting rising DM yields, BOJ hike expectations (92%), and tensions in the Middle East.

Key Takeaways

• 1.India's Q1 FY2026-27 GDP surged 7.8% YoY (vs. 7.1% consensus), supporting MUFG's existing trade recommendation to pay INR 5y NDOIS as Indian rates face upward pressure.
• 2.Markets are pricing a 92% probability of a Bank of Japan rate hike in September following reported comments from US Treasury Secretary Scott Bessent, with today's 10Y JGB auction serving as a key sentiment test.
• 3.US 10-year yields rose to 4.76% and markets are pricing ~70% odds of a September Fed rate hike post-Jackson Hole; however, MUFG expects the Fed to remain on hold through 2026.

Table of Contents

• Market Highlights
• Ahead Today
• INDICATIVE RATES 31-Aug-2026
• FOREIGN EXCHANGE
• Disclaimer
• CERTIFICATION
• LEGAL ENTITIES AND BRANCHES
• GENERAL DISCLAIMERS
• COUNTRY AND REGION SPECIFIC DISCLAIMERS

Report data

CHART 1: WE SEE A GOOD CHANCE THAT INR RATES MAY MOVE HIGHER MOVING FORWARD — as of August 31, 2026.

Reports in this series

Asia FX Talk is shown in chronological order through this edition, published on September 1, 2026.

Part of the Asia FX Talk series — view all 47 editions

Looking for the latest edition? Asia FX Talk Stronger US Jobs data (Sep 7, 2026)

1. May 11Asia FX Talk - USD capped despite stronger-than-consensus NFP
2. May 14Asia FX Talk - Trump-Xi Summit key
3. May 18Asia FX Talk - Sharp rise in global bond yields weigh on EM Asia currencies
4. May 19Asia FX Talk - EM Asia currencies remain under pressure
5. May 21Asia FX Talk - Jumbo rate hike by Bank Indonesia to defend Rupiah
6. May 25Asia FX Talk - USD holds firm, but a US-Iran deal risks a reversal
7. May 26Asia FX Talk - First come first serve
8. Jun 3Asia FX Talk - At a crossroad
9. Jun 4Asia FX Talk - Regional FX remains defensive
10. Jun 5Asia FX Talk - Risks appear balanced in NFP print
11. Jun 8Asia FX Talk - Upside NFP surprise jolts regional FX
12. Jun 9Asia FX Talk - Asian central banks are pushing back
13. Jun 10Asia FX Talk - USD stays firm, BI tightens to support rupiah
14. Jun 11Asia FX Talk - Escalating Middle East risks weigh on regional FX
15. Jun 12Asia FX Talk - Hope deferred makes the heart sick
16. Jun 15Asia FX Talk - It is finished US and Iran reach deal
17. Jun 16Asia FX Talk - BOJ and RBA kick off central bank week
18. Jun 17Asia FX Talk - FOMC in focus
19. Jun 18Asia FX Talk - Hawkish repricing of US rates
20. Jun 19Asia FX Talk - Asian central banks tighten policy amidst hawkish Fed and stronger USD
21. Jun 23Asia FX Talk - Asian currencies modestly weaker
22. Jun 24Asia FX Talk - Risk-off with semiconductor stocks lower
23. Jun 25Asia FX Talk - USDJPY tests 2024 highs amid dollar strength
24. Jun 26Asia FX Talk - USD stays firm amid higher inflation
25. Jun 30Asia FX Talk - Fed independence maintained for now
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27. Jul 2Asia FX Talk - JPY intervention risks ahead - 2 July 2026
28. Jul 3Asia FX Talk - Softer non-farm payrolls and suspected intervention supported JPY
29. Jul 6Asia FX Talk - Watching out for next Dollar catalyst and local Asia factors
30. Jul 7Asia FX Talk - Can future cashflows justify AI buildout
31. Jul 9Asia FX Talk - US yields and oil rebound keep pressure on regional FX
32. Jul 10Asia FX Talk - Rupiah weakness could persist
33. Jul 13Asia FX Talk - Kevin Warsh's Taskforces Assemble - 13 July 2026
34. Jul 14MUFG -Asia FX Talk - When you say nothing at all
35. Jul 15Asia FX Talk - US inflation decline softens Fed rate hike expectations
36. Jul 22Asia FX Talk - Indonesia - There is no free lunch
37. Jul 23Asia FX Talk - Energy supply risks back in focus as US-Iran tensions intensify
38. Jul 29Asia FX Talk - FOMC in focus
39. Jul 30Asia FX Talk - FOMC - Talk is cheap, sharp sell-off in long-end US yields
40. Aug 5Asia FX Talk - There she goes... there she goes again
41. Aug 17Asia FX Talk US data softens, focus shifts to China
42. Aug 27Asia FX Talk Bank of Thailand on hold for some time
43. Aug 28Asia FX Talk Bank of Korea and BSP hiked rates a Homi for your thoughts

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