The Indian rupee strengthened on Friday and is set for its first weekly gain in three after Prime Minister Narendra Modi's ruling coalition scored a massive election win and supported by a decline in the crude oil price. The weaker oil prices helped currencies of major net importers of the commodity, such as India and Thailand, although moves in other parts of the region's emerging foreign exchange market were limited by concerns about the worsening Sino-US trade war.
In India, Modi's thumping win puts his Hindu nationalist party on course to increase its majority on a mandate of business-friendly policies and reinforces a global trend of right-wing populists sweeping to victory. The rupee gained as much as 0.4% to touch a session high of 69.74 against the dollar, en route to a weekly gain of about 0.7%.
The currency ended 0.5% lower on Thursday after scaling a session peak of 69.38 when initial leads suggested a facile victory for Modi's coalition, in line with most of the exit polls. Morgan Stanley analysts said foreign flows will likely accelerate after the electoral verdict.
"We expect the Reserve Bank of India to buy forex at every opportunity to recoup forex reserves with most balance of payments indicators slipping towards 2013 levels. High political stability also opens the scope for raising forex reserves via sovereign forex bonds," said Bank of America Merrill Lynch analysts in a note. Oil declined about 5% as trade tensions dampened the demand outlook, putting the crude benchmarks near their biggest daily drop in six months and on course for their steepest weekly fall in 2019.
The Thai baht appreciated up to 0.4%, its biggest intraday gain in over a week, but is set to decline about 0.6% for the week. Investors in most other Asian units refrained from making big bets as the global sentiment remained negative with Beijing and Washington trading barbs about the ongoing trade dispute.
The Chinese yuan, Indonesian rupiah, the Malaysian ringgit, the Singapore dollar, the Taiwan dollar and the Korean won traded in a tight range. The Taiwan dollar is set to become the worst regional performer during the week, shedding as much as 0.8%.
The Philippine peso is set to put on about 0.5% for the week, while the Korean won is slated to snap a run of four successive weekly losses with a 0.8% gain. Investors bet most Asian currencies will come under further pressure, a Reuters poll showed, with trade tensions between US and China firmly dominating headlines once again.
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