(Bloomberg) -- Prime Minister Narendra Modi has Donald Trump and the oil market to thank for the Indian rupee’s best weekly run since March 2016.
The currency extended a seven-day winning streak to push beyond its 100-day moving average for the first time since February, as falling crude prices soften inflationary expectations and take pressure off the central bank to raise interest rates. A relative strength index showed trading momentum favors the rupee by the most since early January.
Read: Oil Dips as U.S. Inventories Gain And Trump Demands Lower Prices
The reprieve couldn’t have come at a better time for Modi, whose re-election bid in less than six months looks increasingly strained amid deepening social divides, a banking system saddled with bad loans, and mounting tension between the government and the Reserve Bank of India. The opposition has used the rupee’s 10 depreciation this year to criticize his economic management.
India’s economy imports most of its energy needs, and an almost 50 percent surge in the cost of Brent crude priced in rupees from January through October threatens to put a hole in the budget. What’s worse, the government is stepping up social spending before general elections in 2019.
Despite this bleak backdrop, India’s economy is marching on. Gross domestic product grew at a better-than-forecast 8.2 percent rate in the second quarter, and inflation fell in three of the past four months to the lowest level since September 2017. While the trade-deficit last month was wider than expected, oil’s continued decline might help narrow the gap in November.