The Indian rupee experienced a decline on Tuesday amid early trends in the election results, which spurred broad-based dollar demand due to uncertainties surrounding the performance of the Prime Minister Narendra Modi-led alliance.
As of 8:25 am local time, the rupee stood at 22.713 against the UAE dirham, down from 22.654 in the previous session. The rupee reached an intra-day low of 22.735 during early trading.
Early election trends indicated that Prime Minister Narendra Modi’s alliance was leading. However, the tally suggested that the results could fall short of what exit polls had predicted, creating uncertainty and driving demand for the US dollar. A foreign exchange salesperson at a private bank highlighted the market’s cautious stance.
Indian equity markets mirrored the rupee’s decline, with the BSE Sensex and Nifty 50 indices falling nearly 3% amid investor nervousness about the election outcome. Bond yields also climbed as a result of the uncertainty.
“It is evident that markets are not too happy in the context of what the exit polls had indicated. You can see it across equities, bonds, and FX markets,” said Kunal Kurani, associate vice president at Mecklai Financial.
The rupee’s struggles contrasted with movements in other Asian currencies, which advanced after weaker-than-expected US manufacturing data led to a drop in Treasury yields. This discrepancy highlighted the unique pressures faced by the Indian currency in the current political climate.
As the election results continue to unfold, the financial markets are expected to remain volatile. Investors and market participants will closely monitor the final outcomes to gauge the future direction of the Indian economy and its impact on the rupee.
