The rupee pushes higher to an 11-month high, increasing 2.1 percent last week, after the clearest Indian election in the last 30 years. Investor confidence was boosted when pro-business Narendra Modi’s Bharatiya Janata Party (BJP) won 282 of the 543 parliamentary seats, more than the 272 needed to form a government.
The BJP has been the first single-party majority to win since 1984, according to the Election Commission. Investors are optimistic that the pro-business Modi will implement policies that will spur economic growth. The rupee was the best performing currency last week and quickly is gaining momentum against the greenback.
Craig Chan, head of FX strategy for Asia ex-Japan for Nomura-Singapore, said “the outlook for reforms, potential foreign inflows and growth prospects will be even more positive now.” Nomura expects the rupee to see 57 per dollar by year-end.
The E-micro Indian rupee/US dollar futures contracts broke through resistance, signaling further upside. Look for futures contracts to trade higher to 171.40 on increasing optimism. However, profit taking could be in the works. Support will be found at 168.95/169.00.