The rupee surged more than 2 percent this week, the biggest rally since September, on optimism Indian election results today will show a clear winner capable of reviving the economy.
The opposition Bharatiya Janata Party and its allies led in 263 seats and the ruling Congress-led bloc in 75 in the world’s biggest-ever vote, according to NDTV television channel’s tally of count as of 9:30 a.m. in Mumbai. There are 543 parliamentary seats up for grabs, with 272 needed for a majority. The S&P BSE Sensex of local shares jumped 5.2 percent, the most in five years, to a record.
“Counting shows the BJP is poised for a majority win, which has boosted the rupee,” said Manis Thanawala, a director at Greenback Forex Services Pvt. in Mumbai. “The sharp surge in local stock indexes is also a positive for the rupee.”
The currency gained 2.3 percent this week and 1 percent today to 58.685 per dollar as of 10:21 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest five-day advance since Sept. 13. It touched 58.62, the strongest level since June.
The Reserve Bank of India intervened in the foreign-exchange market to curb currency volatility, limiting gains in the rupee, according to four dealers who declined to be identified because the information isn’t public.
One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, fell 108 basis points, or 1.08 percentage point, today and 227 basis points from May 9 to 8.94 percent, according to data compiled by Bloomberg.
Three-month offshore non-deliverable forwards rose 1.9 percent this week and 0.8 percent today to 59.67 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.