Rupee becomes strongest currency in Asia |
The Indian rupee can see gains as Prime Minister Narendra Modi`s sweeping election victory has boosted foreign inflows. But this also presents a dilemma for the central bank. The rupee has emerged as Asia`s top performer in the past three months, thanks to the flow of foreign cash. With inflows accelerating after the election result, the Reserve Bank of India may have to rein in the currency or risk making the nation`s exports less competitive as rival currencies weaken. India may lure $22 billion of capital inflows in the year to March, prompting the RBI to buy dollars to bolster the nation`s reserves and ease a cash deficit. The authority also took in $10 billion through two swap auctions held since March to ease a cash crunch. India was removed from the US Treasury Department`s currency manipulation watch-list last week, and the RBI will want to be cautious about excessive intervention so as to not draw attention from the US. Global funds plowed $1.45 billion into local shares and bonds last week, the most since the end of March, as Modi`s win boosts the appeal of Indian assets. The drop in US yields and in the price of oil -- the nation`s biggest import -- have also helped improve the rupee`s prospect.
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