Rupee may continue to rise after initial pause

A surge in foreign investment has powered the rupee’s rise as economy expanded rapidly and the NDA government pressed on with its reform agenda. Though the alliance lost power in the elections, the economy is expected to grow at more than six per cent this year and reforms are unlikely to be derailed.

The rupee touched a four-year high of 43.5450/5500 per dollar on April 7. But over the past three weeks it was weighed down by concerns about a hung Parliament and erased the five per cent gains on the dollar made earlier in the year.

The rupee ended at 45.25/29 per dollar on Thursday, appreciating by more than one per cent from a four-month low of 45.72 hit in early deals, as election results pointed to a stable government led by the Congress.

“We have to see what the new government looks like. But if you have someone like Manmohan Singh for finance minister, you can expect a further recovery in the rupee,” said Dominique Dwor-Frecaut, Singapore-based strategist for Barclays Capital.