The Indian Rupee softened against a host of other majors on Tuesday as it tracked other Asian currencies lower. The situation between Greece and its creditors has damaged risk sentiment, causing emerging-market currencies like the Rupee to soften against safe-haven assets like the US Dollar. However, some members of the Greek government are remaining remarkably buoyant despite the lack of liquidity in the nation. Greek finance minister Yanis Varoufakis said that he believes a deal is on its way, stating: ‘I think we are very close… Let’s say (it’s a matter) of about a week.’ However, Greece is on the verge of running out of money and has little hope of making another International Monetary Fund (IMF) repayment in the near future unless it unlocks emergency bailout funds. Varoufakis continued: ‘I assure you that if we face a dilemma between paying a creditor who refuses to sign an agreement with us and a pensioner, we will pay the pensioner… I hope we will be able to pay both.’
Last week the Rupee advanced significantly against the US Dollar, registering its largest gain in four months. Weaker US data softened the US Dollar, giving riskier currencies such as the Rupee the opportunity to climb as investors priced in a delay in US Federal Reserve rate hikes. Foreign exchange expert Sajal Gupta commented: ‘The economic data coming out of the US don’t seem to support the case for an immediate increase in rates.’
Meanwhile, Tuesday’s UK Consumer Price Index (CPI) saw the Pound Sterling to Indian Rupee (GBP/INR) exchange rate drop by over 1.0%. The UK dipped into disinflation territory in April with non-core CPI printing at -0.1%. The Office for National Statistics stated: ‘This is the first time the CPI has fallen over the year since official records began in 1996 and the first time since 1960 based on comparable historic estimates. The largest downward contribution came from transport services – notably air and sea fares, with the timing of Easter this year a likely factor.’
However, it’s forecast to be a quiet week ahead for Indian data, leaving the Rupee dependent on macroeconomic developments for movement. Additionally, the Rupee exchange rate is forecast to fluctuate on account of Reserve Bank of India (RBI) rate cut speculation. The upcoming June 2
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meeting has the potential to see the RBI make a downward adjustment to borrowing costs after already making two revisions this year. Inflation fell to 4.87% in April from the previous month’s 5.25%, giving the RBI scope to cut as consumer price pressures ease.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate is trading at 98.8690. The US Dollar to Indian Rupee (USD/INR) exchange rate is trending in the region of 63.6200.