The Indian rupee hit a five-month high on Tuesday after the decisive win for the ruling coalition in national elections, while most Asian currencies rose as hopes of a global economic recovery boosted risk appetite. The world's top policy makers offered their most upbeat assessments of the global economy in months, saying it was stabilising and it could start growing again.
Investors have turned bullish on all seven emerging Asian currencies in the past month, a Reuters survey shows, as they took heart from tentative signs of a global economic recovery.
INDIAN RUPEE The rupee jumped over 1 percent to 47.26 per dollar, its highest level since December 19, 2008. It later pulled back to 47.50 due to profit-taking. On Monday, the rupee broke its 200-day moving average and rallied 3.2 percent, its biggest one-day gain in a decade.
The market has been heartened by a decisive victory for the Congress-led coalition, because it has increased the prospects of reforms to boost long-term growth and investment. One Singapore-based trader said the rupee may even test 45 in coming months, but some analysts were more cautious, saying India's slowing economic growth and widening current account deficit would weigh on the currency.
Indeed, forwards markets indicated the rupee would still fall from the current spot rate, with six-month offshore non-deliverable forwards pricing in a 1 percent depreciation. "The election outcome is indeed a very welcome surprise. At least there's hope for faster reform and fiscal consolidation," said Han Sia Yeo, currency strategist at ANZ. "But there are still many hurdles to cross for the economy."
PESO The Philippine peso followed the firm tone in Asia, rising 0.4 percent to 47.35 per dollar. "More downside is still expected for dollar/peso," said a dealer in Manila. Six-month offshore dollar/peso NDFs fell to 48.09, implying a 1.5 percent peso fall from the spot rate compared with 1.7 percent on Monday.
Meanwhile, spreads between six-month offshore NDFs and onshore forwards narrowed with the latter edging up to 47.995. "That means no (dollar) demand on the offshore market," added the Manila-based dealer.
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