Rupee's Unexpected Rally Showcases RBI's Pivot for India Markets

Asia’s worst-performing currency for the year offered the region’s best returns over the past week as slowing Indian inflation added to the cheer over the central bank’s surprise reduction in interest rates.

While a rate cut typically lowers a currency’s yield appeal, it bolsters foreign inflows into local shares, which helps strengthen the rupee. Global funds have bought $410 million of Indian shares this month, after being sellers in January. The inflow has fueled a seven-day rally in the currency, the longest streak in three months.