For the second consecutive session, the Indian Rupee (INR) was able to close out local trading in a stronger position against the US Dollar (USD). The Rupee gained by a further 3 paise to achieve 62.16 against the ‘Greenback’.
The Rupee’s gains were largely due to ongoing US Dollar selling among local exporters and banks, but the emerging market currency also benefited from the fact that US markets were closed for a national holiday.
However, Rupee gains were a little limited as investors adopted cautious positions ahead of the Eurogroup’s gathering. European officials are meeting to discuss the Greek debt situation, and if the negotiations take a turn for the worse, it could increase ‘Grexit’ speculation and deplete demand for higher-risk assets.
Some Rupee movement also occurred after India’s Wholesale Price Inflation (WPI) fell into negative territory for the second time in three months.
WPI had been forecast to print at 0.77% in January but actually fell to -0.39%. This was down from a figure of 0.11% in December.
November’s number was negatively revised to -0.17%.
The development saw many industry experts calling for an interest rate cut from the Reserve Bank of India (RBI).
The argument being proposed is that lower borrowing costs would both bolster domestic industrial growth and increase demand.
That being said, the Indian Rupee was able to gain by almost 1% against the Pound on Monday as the British asset came under pressure as a result of mixed UK house price data and the expectation that tomorrow’s UK Consumer Price Index will print at a 25-year low.
While the Bank of England (BoE) has projected that inflation is likely to fall to or beyond 0.0% in coming months, if tomorrow’s CPI figure comes in below-forecast it will put the Pound under pressure.
Investors with an interest in the GBP/INR currency pair will also be looking ahead to Wednesday and the release of the UK’s employment figures.
Influential Indian reports are in short supply for the rest of the week, but global economic developments (from the Greek debt renegotiations to commodity price movements) may have an impact on the Rupee.
The direction taken by the USD/INR currency pair will also be dictated by the publication of the minutes from the Federal Open Market Committee’s (FOMC) recent policy meeting.
Hawkish minutes, supporting the case for an increase in borrowing costs by September, would give the ‘Greenback’ a boost.
During the European session the US Dollar to Indian Rupee (USD/INR) exchange rate was trading in the region of 62.1390