The Indian Rupee (INR) weakened against the Pound Sterling (GBP) following the release of stronger than forecast UK economic data, and weakened for a sixth consecutive session against the US Dollar (USD) after the Reserve Bank of India (RBI) kept interest rates on hold at 7.5%.
Against the Euro (EUR), the Indian Rupee advanced, as the single currency was weakened by the release of a disappointing Eurozone service sector report. Investors were disappointed after the Eurozone services business activity index for March came in below a previous flash estimate. The index reached 54.2, below the estimated figure of 54.3.
The Rupee weakened against other peers as the RBI left interest rate unchanged and stated that it was waiting for more clarity on inflation after heavy rains increased uncertainty over food prices and as it gives domestic banks more time to reflect on its earlier rate cuts.
‘With little transmission and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank will maintain status quo in its monetary policy stance in this review,’ the central bank said in a statement.
As the session progressed, the Rupee weakened against the Pound following the release of data, which showed that activity in the UK’s dominant service sector increased to its strongest level since August 2014.
According to market research group Markit, the UK services Purchasing Managers Index increased to 58.9 last month from a reading of 56.7 in February. Analysts had expected the index to rise to 57.0 in March. The better-than-forecast PMI report adds to the strong showing by last week’s construction and manufacturing PMI’s.
The data increased expectations that the UK economy expanded by 0.7% in the first quarter of 2015 and increases pressure on the Bank of England to hike interest rates.
The Rupee also weakened against the US Dollar after the American currency recovered from the declines it suffered at the end of last week. The currency had come under pressure after the Washington based Labour Department reported that the US economy only created 126,000 new jobs last month, a figure that was less than half February’s gain and was the smallest rise seen since December 2013.
Today, the ‘Greenback’ rallied as investors deemed the previous losses were overdone and suggested that the weak report did not mean that the US economic recovery was slowing.
The Rupee will experience further volatility on Friday when the latest balance of trade, inflation and industrial production data is released.
The GBP/INR exchange rate was trading in the region of 92.8400