The Indian currency had its biggest single day gain against the dollar since December 18, 2018
The exchange value of Indian rupee against the US dollar surged more than a percentage point on Monday, cheering exit polls predicting a return of Prime Minister Narendra Modi’s party BJP-led National Democratic Alliance (NDA) to power.
The rupee, which opened at 70.36 against the US dollar in the interbank forex market, appreciated 79 paise to 69.44 in the opening trading hours.
It was the Indian currency’s biggest single day gain against the dollar since December 18, 2018.
Monday’s level is also a 2-week high for rupee, which has been falling in the recent weeks on the back of firming up of crude prices and not so very favourable prediction on Monsoon rains in India.
“Monday’s surge in the rupee value against USD could be temporary as most of the other factors continue to be negative for the Indian currency,” Ajay Kedia, MD of Kedia Comtrade and Research, told Arabian Business.
“Crude prices are expected to further firm up after the forthcoming meeting of OPEC (Organization of the Petroleum Exporting Countries). Besides, market is not very confident about a normal Monsoon this year, though the Indian Meteorological Department says it would be almost near normal,” Kedia said.
The OPEC countries are scheduled to meet in Vienna on June 25.
Brent crude price was trading at $73.28 per barrel on Monday morning, higher than the previous day’s level.
Besides rupee, bond yields in the Indian market also fell 7 basis points to hit a seven-week low on Monday, reacting to the exit poll predictions.
Bond prices and yields move in opposite direction. The 10-year bond yield was at 7.293 percent, compared with Friday's close of 7.364 percent.
Most exit polls have predicted NDA to win more than 300 seats in the 543-seat Lok Sabha (Lower House of Indian Parliament).
However going by the way the exit polls in the last two elections were off the mark from the actual numbers, some of the market analysts were skeptical about the market reaction.
“An NDA victory was partly discounted in the markets over the last few days.” Tarun Satsanghi, a Delhi-based forex market analyst, said.
The rupee is expected to be in the range of 68.50-69.50 against the US Dollar in the short-term, Kedia said.