Rupee Higher on Better Than Expected Growth

by on March 28, 2014 1:30 pm BST

The Indian rupee saw the largest quarterly advance in almost two years on newly sparked growth optimism. Foreign investors increased asset purchases in hopes that the new government will expedite economic recovery. After several interest rate increases, inflation in February ticked down and growth forecasts increased from the lowest outlook in 10 years.

India has seen $9.3 billion in capital inflows, the most among major Asian economies. Since the end of 2013, the rupee seen a 3.2 percent gain against the greenback, while rising nearly one percent today. What is more impressive is that the rupee recovered more than 15 percent from record lows last August.

Foreign investors are betting on the upcoming elections and the opposing party, Bharatiya Janata Party,  winning a majority of votes. Andy Ji, strategist at Commonwealth Bank of Australia, said “I don’t see the currency gaining much more before the elections as there’s uncertainty if the polls will deliver a clear mandate to either party.” According to Ji, the recovery in the rupee was primarily due to the increased transparency and credibility brought on by the new Reserve Bank of India Governor Raghuram Rajan.