Indian rupee hits two-week high as US midterm outcomes lift sentiment

The Indian rupee opened at 94.35 per US dollar on November 5, its highest level in two weeks, gaining 0.3% from the previous close. The rise coincided with a drop in oil prices and market expectations that the outcome of the US midterm elections could influence President Donald Trump's approach to the conflict with Iran.

Analysts at ING Bank said the Democratic Party's victory would make them more confident in challenging Trump's policies on Iran, Israel and tariffs. MUFG Bank described the election as a "meaningful shift" that could reduce the political and geopolitical risk premium priced into markets.

The dollar index fell 0.4% to 101.3, while the euro, sterling and Swiss franc gained. The rupee briefly touched its two-week high before easing as importer and interbank dollar bids gathered around the 94.50 level. A trader at a state-run lender warned that selling USD/INR was risky because price dips were unlikely to hold.

A Reuters poll of analysts indicated that most expect the rupee to relinquish recent gains and slip again in the coming months amid a volatile external environment. Natixis noted that the Reserve Bank of India has intervened heavily, raised about $143 billion through a deposit and borrowing scheme and increased interest rates, preventing a disorderly collapse. However, the note added that structural reforms are needed to address underlying weaknesses such as high oil prices and weak portfolio flows.

US midterm results gave Democrats control of both the House and the Senate, limiting President Donald Trump's ability to advance certain policies, including retaliatory tariffs and the approach to Iran.