For the Indian rupee, 2018 is a year to forget. It was among the worst performing currencies for most part of the year. But it is making a comeback, which might continue into 2019, Bloomberg reported quoting currency analysts.
The rupee jumped 2.1 percent on Monday, 17 December, and Tuesday, 18 December, its biggest two-day gain since September 2013, before ending little changed on Wednesday, 19 December. The currency is up 3 percent this quarter, the best performance in Asia after Indonesia's rupiah, Bloomberg reported.
Analysts suggest the reversal in rupee’s fortune is due to softening of fuel prices and a more dovish policy by the Federal Reserve in the US.
"We expect the rupee to be a top performer, particularly on a total return basis," Dushyant Padmanabhan, a strategist at Nomura Holdings Inc, told Bloomberg, adding that low oil prices and a less hawkish Fed will is likely to fuel the reversal.
according to the report, India’s dependence on imports to meet its fuel requirements sent the rupee to multiple lows in October and spurred foreigners to pull about $12 billion from local stocks and bonds in 2018.
Currency Markets Back a Modi Comeback in 2019
Experts believe that currency markets have based their predictions on the hope that Narendra Modi-led BJP will return to power after the 2019 general elections.
"The market has priced in return of the incumbent with reduced majority," Bloomberg quoted Aditya Pugalia, Dubai-based director of financial markets at Emirates NBD PJSC, as saying. "Should that not happen and results throw up a fragile coalition, then it will put the rupee under pressure," Pugalia added.
According to a Bloomberg survey of economists, the rupee will end 2019 at 71.15 per dollar.
(With inputs from Bloomberg)
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