Rupee may swing to poll dance 2019

Since India has become more tightly knit with the global economic order, its currency has ebbed and flowed against the dollar in the run-up to balloting in the world’s biggest democracy. About a couple of months before the staggered polling, the rupee becomes almost a proxy for the mood of the national electorate. When expectations are such that a dominant government with policy visibility would run the Treasury, the rupee appreciates against the dollar. For instance, the unit strengthened about 4 per cent against the dollar between April 7 and May 12 in 2014 in anticipation of a strong showing by the BJP-led National Democratic Alliance.

The quantum of rupee gains was similar between April 16 and May 13, 2009, when the Congress-led United Progressive Alliance was expected to return to power with a stronger majority. The rupee’s move against the dollar after national elections is a rather mixed bag. It lost 2.3 per cent two months immediately after the 2014 election results, reflecting the impact of global economic factors. By contrast, the rupee rose about one percent against the dollar after the Manmohan Singh government returned to power in the summer of 2009.