The Indian rupee rose against the dollar in early trading, helped by a rebound in most regional currencies after weak U.S. data.
However, rising oil prices and wider-than-expected domestic trade deficit is expected to cap the currency's advance.
The rupee changed hands at 70.22 to a dollar against 70.3350 at the previous close. The local unit opened at 70.27 per dollar and traded in 8 paisa band so far.
There are only two more sessions of trade before the exit polls. The price action will therefore be more of a function of how traders want to be positioned prior to that. The impact of exit polls suggesting struggles for the Narendra Modi alliance will be much more pronounced than one which signals a victory.
The exit polls of India's multi-phased general elections are due to be announced in the evening of May 19. The results are due on May 23.
Retail sales in the world’s largest economy declined 0.2% month-on-month in April, compared to expectations of a 0.2% increase. U.S. April industrial production, which also missed estimates, further boosted demand for the bonds.
The weak U.S. data helped the rupee overcome a wider-than-expected India trade deficit and rising crude oil prices.
India’s trade deficit widened to $15.3 billion in April from $10.9 billion in the previous month, data released late yesterday showed. The trade gap was wider than $13.72 billion in the same month last year and $10.89 billion in March.
India’s monthly goods trade deficit widened in April but, given its very low exposure to a ratcheting up of trade tensions between the US and China and the fact that oil prices are likely to fall, we think the deficit will remain contained over the coming months. The house expects India’s current account deficit to remain between 2.0%-2.5% of gross domestic product over the coming quarters.
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