The rupee has rallied by more than three percent since February, fuelled by anticipation that ruling Bharatiya Janata Party and current Prime Minister Narendra Modi are on course to win the upcoming elections over April and May. His surge in popularity comes as tensions between India and Pakistan continue to deteriorate following India’s military strike on Pakistan in retaliation for a suicide attack in the disputed Kashmir region. As of just after 3.00pm UK time, the Indian currency is trading at 68.8325 against the US dollar, having smashed into the 60-region once again. Earlier this week, the rupee flew its highest level against the US dollar in more than seven months and its highest level since August 2018.
The rupee appreciated 4.2 percent to 68.45 versus the American greenback in three weeks.
A forex dealer at a state-run bank: “Typically, the rupee rises in March due to seasonal factors.
“But this time the Modi factor is also getting quite a bit of inflows.
“The RBI (Reserve Bank of India) also seems to be waiting for the rupee to touch a specific level rather than come in intermittently and intervene.
“I expect RBI to intervene if the rupee rises to 69.50.”
General elections in India will be held in stages from April 11 when 875 million people will be eligible to vote in one million polling stations across the country.
Results are due on May 23.
Meanwhile, foreign inflows into Indian equities and debt markets have surged, with $3.65billion pouring in this month as of mid-March.
That compares with inflows of $1.58billion in February and $788million outflows in January, according to exchange data.
Paresh Nayar, head of trading desk at First Rand Bank in Mumbai, said: “I don’t think many would have expected such sharp appreciation with the RBI not intervening aggressively and with inflows still lined up.
“The next support is 68.50.”
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