The Indian rupee rallied for the fourth week, the longest surge in over a year, as the victory by the main opposition party fuelled investor optimism and local business sentiment.
The rupee rose 0.5 percent to trade at 58.5075 per dollar this week. The rupee declined 0.1 percent on Friday after earlier rising to 58.3350, the highest level since last June. The currency has advanced 3.1 percent since the beginning of May.
“The rupee touching 57.50 in the next month looks imminent now as the euphoria of election results is likely to continue,” said Suresh Nair, a Mumbai-based director at Admisi Forex India, told Bloomberg. He also added that foreign investors were buying local stocks, boosting the rupee.
The main opposition party Bharatiya Janata Party clinched the majority number of seats in the Indian parliament that are required to form a government. It also sets the party, which is led by Narendra Modi, on course to make favorable policies to spur economic growth without being smothered by coalition politics.
Foreign investors are estimated to have bought $189.5 million worth of local stocks from Monday to Thursday, bringing the cumulative monthly inflows in May to $2.3 billion. Analysts said that any further gains in the rupee will be limited due to an intervention by the central bank to purchase dollars via state banks.
The rupee’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign price to options, fell 117 basis points to 7.4775 percent this week. The gauge declined 0.08 percentage point or eight basis points on Friday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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