On Thursday, the Indian Rupee was able to reduce the previous losses as it closed at 87.55 in regard to the exchange rate with the US dollar after being upgraded by S&P Global in terms of credit rating. The domestic currency had started lower to was pushed to an intraday low of 87.67 and made a resounding recovery following the news emanated by the global ratings agency.
India improved its long-term unsolicited sovereign credit rating by S&P Global to the above-average grade of ‘BBB’ (previously held a grade of ‘BBB-), which is a positive development in the credit rating of the country. The agency argued that the institutional quality of the country, India, is characterized by a strong economic resilience, continuing fiscal consolidation, and a sound growth path, which made the upgrade possible. It also accentuated growth in the quality of government spending that has aided long-term fiscal stability.
The action came after S&P Global last year in May changed the India outlook to “positive” rating in reaction to a run of sound economic performance amidst global headwinds. The agency has indicated that India could sustain a stable growth, improve its fiscal indicators, and foreign exposures as one of the factors that compelled its decision.
Currency traders observed that the upgrade contributed to reversing the downwards direction of the rupee in the session to ensure that it closed with a gain of only 11 paise at the market close. Analysts do feel that the better credit rating will lend an impetus to investor sentiment, foreign capital inflow, as well as a medium-term savior to the rupee, though the short-term fluctuations would continue to be driven by the global situation with interest rates in the US, oil prices, and geopolitical events.
In general, the rating upgrade on Thursday not only provided immediate stability to the Indian currency but also reflected the high regard of international investors for the Indian macroeconomic health and fiscal soundness that could prove a more solid growth factor in its economic growth in the upcoming years.
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