The Indian rupee (INR) has gained 0.31% against the United States dollar (USD) through November 3 and early on Wednesday, November 4, rising from 94.91 INR per $1 to 94.61 INR per $1.
This rally appears primarily linked to the U.S. midterm elections that saw the Democratic Party take both the House of Representatives and the Senate from the Republicans, and secure several governorships, including in states like Texas.
Notably, the shift in the political landscape led traders and investors to reevaluate what the superpower’s policies might be in the foreseeable future, and to what extent President Donald Trump can obstruct the legislature – ahead of the election, he declared he would become ‘Mr. Veto’ if the blue wave hits.
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Given these circumstances, INR’s rise against USD appears part of a wider repricing which saw both the U.S. stock market suffer an extended session sell-off, and the broader U.S. Dollar Index (DXY) record a 0.60% drop on November 4.
India’s Central Bank steps in to reinforce INR
Elsewhere, while the latest Indian rupee move appears tied to American politics, the currency has been gaining ground for roughly a month thanks to a series of central bank measures designed to support it.
Notably, INR rose approximately 2.3% against USD since October 11, following the Reserve Bank of India’s intervention to halt the decline that took it to early October lows.
These include the sale of the American dollar by state banks and new reserve requirements on large hedges.
Why INR’s next move might depend on Washington and Tehran
Still, it remains unclear if the latest rise will prove resilient. On the other hand, previous rallies failed to demonstrate earnest staying power, and the Indian currency remains at risk of heightened volatility contingent on how the oil market behaves.
The first major shock could come before the end of the week – and is likely to come before 2027 – though its direction is far from certain. Indeed, the U.S. government has both indicated it is negotiating with the Islamic Republic of Iran and that it is preparing a major escalation.
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Simultaneously, Tehran appears to have been denying and confirming ongoing talks.
Featured image via Shutterstock
