The Indian rupee halted a two-day plunge after the government data showed that exports grew by the fastest pace in seven months, fuelling optimism that the economy is on the right track to recovery.
The rupee closed at 59.2775 per dollar on Wednesday compared to 59.2975 on Tuesday. The rupee has advanced 4.3 percent since January versus the dollar, making it the best performing currency among 11 Asian currencies.
India’s exports accelerated 12.4 percent in May from a year ago, the strongest pace since October, indicating that the economy is rebounding after earlier the overseas shipments slowed down in February and March.
“The exports data turned out favorably, which was supportive of the rupee,” Sugandha Sachdeva, the head of currency research at New Delhi-based Religare Commodities Ltd told Bloomberg.
Global funds have also pumped in money into the country’s financial markets, helping strengthen the rupee, though it is expected that the central bank may intervene in order to protect exports.
“Inflows are still continuing and that is helping the rupee,” said Paresh Nayar, the Mumbai-based head of currency and money markets at FirstRand Ltd. “The expectation is the new government will be able to take measures that will help revive growth.”
Foreign investors sunk a net of $3.2 billion in local stocks and bonds in June after the main opposition party Bharatiya Janata Party won the national elections, spurring speculation that the new administration will enact investor-friendly policies to revive economic growth.
The rupee’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign prices to options, rallied 0.05 percentage point, or five basis points, to 7.12 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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