Dark Days for Indian Rupee as Indian Elections Approach

Strategists in a Reuters poll said that the Indian rupee had a weak start in 2019 which indicates as to how it will perform in this year. The strategists believe that there is uncertainty attached to the rupee ahead of the Indian general elections and chance of ‘a potential trade conflict with the United States’.

Also read: Pak Rupee Drops to Record Low of Rs139.5 against the US dollar

In 2018, the Indian currency went down by 10% and hit record low 74.485 against the US dollar. Since 2013 it was its worst performance. The consensus is that the rupee will not break its 2018’s record but it is expected that India rupee will weaken by over 1% and reach 71.28 in 12 months from about 70.50. This is a per the poll of 50 currency strategists.

Indian currency that has depreciated by 1% will weaken by 2% further by end-May as predicted. So this is no good news for the ruling BJP party in India as elections approach.

Asia economist at ING Prakash Sakpal, “The rupee’s weakness has started kicking back in and will remain in play until the political dust settles.”

A senior economist at Rabobank Hugo Erken said, “We expect a win for the BJP in May, but it will be very difficult for the BJP to get a substantial majority which will complicate a further implementation of necessary reforms.”

Adding, “In the medium-term we expect a gradual depreciation of the INR due to a normalization of inflation rates. In case of a loss for the BJP in May, we expect financial market volatility – the INR could potentially spike to 74, the levels that we saw during the Indian rupee crisis last year.”

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