Indian Rupee Holds Title Of Best Asian Currency So Far In 2024

The resilience of the Indian rupee can be due to strategic interventions by the Reserve Bank of India, which possesses substantial foreign exchange reserves. These interventions have effectively supported and defended the value of the local currency amid market fluctuations, according to analysts. In 2024, the rupee hit an all-time low of Rs 83.58, but it still stands out as the best-performing currency in Asia despite the downturn.

The rupee has depreciated 0.12% on a year-to-date basis in comparison to a 3.32% advance in the US Dollar Index, according to Bloomberg data.

The Lok Sabha election can indeed have an impact on the trajectory of the rupee. The Union government may prioritise maintaining a stable currency to prevent inflationary pressures, according to Anil Bhansali, executive director at Finrex Treasury Advisors LLP.

The government may aim to avoid actions or policies that could lead to a significant depreciation of the currency, especially during the election period, to retain investor confidence and minimise potential capital outflows from the system, he said. Bhansali predicted a range of 83–84 for the current after the polls.

The relative stability of the rupee is also a reflection of the strong growth of the Indian economy and its balance-of-payment surplus, BNP Paribas has said in a note last week.

The general election does not raise alarm bells for foreign investors. The Bharatiya Janata Party is anticipated to secure a significant majority in the lower house of Parliament, according to BNP Paribas.

The outcome is expected to sustain the momentum of reform initiatives undertaken over the past decade, aimed at fostering growth and advancing the manufacturing sector, it said. "It will be up to the newly elected government to accelerate the pace of the reforms and implement them."

While concerns regarding Iran-Israel tensions have eased, a strong dollar continues to weigh on emerging-market currencies, including the rupee, according to CareEdge. "FPIs have so far pulled out of Indian markets in April. Nevertheless, in the year so far, rupee remains a top performer compared to some EM and Asian peers, likely supported by RBI interventions," it said.

CareEdge expects the rupee to trade within the range of 83.00 to 83.50 in the near term, with a note of caution regarding potential risks stemming from geopolitical tensions.

It projects a marginal appreciation of the rupee in the current fiscal with a range of 82 to 82.50. This outlook is underpinned by India's robust fundamentals, including healthy economic growth hovering around 7%, a comfortable current account deficit of approximately 1% of the gross domestic product and an anticipated surge in foreign-portfolio-investment inflows, CareEdge said.