Indian Rupee (INR) Exchange Rate Rallies as BJP Take over 250 Seats
As India’s election resulted in a landslide victory for the opposition Bharatiya Janata Party, the Rupee posted widespread gains during local trading.
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According to records, this election saw the largest number of voters in India’s democratic history and the determination of the populace to punish the corrupt ruling Congress-led party led to them taking just 75 seats.
The BJP, who are expected to bring economic stability to India, received 263 seats.
As a result, the Rupee jumped by 1 per cent in a day against the US Dollar, bringing the currency’s total weekly advance to 2.3 per cent.
The Rupee was also in a stronger position against several of its other most-traded currency counterparts.
According to one Seoul-based currency analyst; ‘With political uncertainty cleared, the Rupee’s outlook is getting brighter.
‘It will also benefit from more carry trades. Lower US yields, as well as easing bias of the ECB, will boost fund inflows to emerging Asia. We may see money moving from Southern Europe to Asia too.’
Similarly, fixed-income trader Debendra Kumar Dash observed; ‘The positive sentiment around the election results is aiding gains in the bond market. Investors hope a stable government would show fiscal prudence and control inflation, helping cap yields.’
However, while the Rupee achieved a high of 59.3500 against the US Dollar, gains were a little restrained after the Reserve Bank of India intervened in the currency market to limit the local asset’s strength.
Currency traders indicated that the RBI sold Dollars to ensure the Rupee didn’t strengthen beyond 58.5 against the US Dollar.
Over the next two weeks the only major Indian economic report to be aware of is the nation’s quarterly GDP growth rate – due out on the 30th.
The nation posted growth of 4.7 per cent in the fourth quarter of 2014.
Of course movement in the USD/INR and GBP/INR pairings is also likely to occur in response to developments in the US and UK.
Signs that the US economy is struggling would add to the case for the Federal Reserve leaving interest rates on hold and could boost the emerging-market Rupee.
Conversely, upbeat UK reports could push the Bank of England into revising its rate hiking plans and bolster the Pound against its currency peers.
The Pound is currently trading against the Rupee in the region of 99.1250.
The US Dollar is currently trading against the Rupee in the region of 58.9700.