India’s Rupee Completes Second Weekly Gain on Election Optimism

India’s rupee completed its second weekly gain on speculation the world’s largest democracy will elect a government capable of reviving economic growth.

The main opposition Bharatiya Janata Party is leading in opinion polls as voters seek to punish the ruling Congress party for graft scandals and an economic slowdown. The last round of voting will take place on May 12 and the results will be announced on May 16. Global funds bought a net $661.2 million of Indian stocks and bonds this month through yesterday, according to the latest exchange data.

India’s currency rose 0.2 percent this week to 60.0250 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It reached 59.9225 yesterday, the highest level since April 9, and advanced 0.1 percent today.

“The market is gearing up for the election outcome and is looking forward to next week’s exit polls, which will give an indication of final results,” said Amogh Moghe, a Mumbai-based foreign-exchange trader at Mecklai & Mecklai Ltd. “If the results are as per the opinion polls, then the rupee could appreciate to 59.25.”

Results of exit surveys will be released after polls end on May 12.

Federal Reserve Chair Janet Yellen said May 7 in her testimony to the Joint Economic Committee of Congress that a “high degree” of accommodation remains warranted and that the central bank must continue to spur economic growth as indicators for inflation and employment remain far from its goals. Those dovish comments aided the rupee’s weekly gain, Moghe said.

Implied Volatility

The U.S. central bank has been trimming its bond-purchase program this year, and last reduced it by $10 billion to $45 billion this month. Its policy of buying debt had driven inflows to emerging-market assets, including those in Asia.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, declined seven basis points, or 0.07 percentage point, to 11.1725 percent today, according to data compiled by Bloomberg. The measure fell 69 basis points this week, its biggest drop since the end of February.

Three-month offshore non-deliverable forwards on the rupee rose 0.3 percent this week and 0.1 percent today to 60.95 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 the greenback.

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