Rupee hits 1 yr high against USD

As an immediate effect of BJP's massive state electoral win, the Rupee has hit its one year high, valuing up to 65.4 against the USD. The rupee increased by 29 paise on March 16, 2017 from its previous close. Rallying over 3.4 per cent in the year 2017, the Rupee has become the best performing currency in the Asia region, preceded by South Korean Won and Taiwan Dollar valuing up by  5.44 per cent and 4.95 per cent respectively.

Following BJP's victory in the assembly elections, the inflow of foreign institutional investments in the last two days (from March 14, 2017) has increased by a net amount of Rs 4,981 crore, increasing liquidity in the equity market in hopes of convenient reforms, as stated by NSDL. While, there has been an inflow of Rs 23,007 crore in the Indian equity market over the last one year (till February, 2017).

Supporting the appreciation in the currency, the data on trade deficits also showed positive trends with the deficit lowering in the February monthly basis data and also the year-on-year data, establishing positive sentiments in the investors for the economy's external sector.

However, experts also emphasised on the speculative nature of the hike, throwing light on the recent drop in the oil prices to 50 dollars per barrel. Thus, expecting RBI to intervene and correct the overvaluation of the currency to its ideal level of around Rs 66, eliminating the speculative effect to the benefit of the Indian export sector.