The Indian rupee outperformed all its emerging market peers in the first two months of the year, setting the stage for a strong 2024 as the nation’s inclusion in global bond indexes spur inflows.
The rupee was broadly steady versus the dollar in the past two months, making it the sole developing-nation currency to avoid a decline as the greenback charged ahead during that period. The advance came as global funds pumped almost $5 billion into Indian bonds to position for the nation’s inclusion in global indexes in the coming months.
India’s currency is likely to appreciate to 81 per dollar by end-December from around 82.9 on Tuesday, according to Credit Agricole SA and TD Securities. The rupee is among the least volatile emerging-market currencies this year, with traders speculating that the central bank may have dipped into its $619 billion foreign-exchange reserve stockpile to limit the swings.
“Overall, we will likely see a mild appreciation of the rupee with volatility still remaining quite low,” said Prashant Singh, senior portfolio manager for emerging-markets debt at Neuberger Berman in Singapore. “Some near-term rupee outperformance might be seen on the back of index-related flows.”
The median analyst forecast is for the rupee to appreciate to 82 per dollar by year-end, according to data compiled by Bloomberg.
