The Pound to Indian Rupee exchange rate extended losses on Wednesday, hitting its worst levels in over three years as Brexit-panic inspired markets to sell the Pound and protect their assets in safer investments. The Rupee easily gained on the Pound thanks to this and lower oil prices.
Sterling (GBP) Remains Unappealing This Week
Since the Brexit result shook markets in late-June, the Pound has been easily pressured against most rival currencies, regularly falling across the board as UK markets shift in response to Brexit developments.
The most recent news to undermine the Pound had been the sudden suspension of withdrawals from some major property fund companies.
On Monday, Standard Life barred withdrawal after a slew of investors attempted to withdraw their assets to store in safer places. This was followed on Tuesday by M&G Investments and Aviva Investors. Henderson followed on Wednesday.
As losing funds rapidly due to the panicked movements of markets could harm these property funds, withdrawal was suspended. Investors reacted by pouring out of other UK investments instead, causing Sterling to plummet.
UK Conservative Leadership Contest Ongoing
Sterling has also been able to hold its ground amid ongoing political uncertainty, with the UK’s ruling party, the Conservatives, currently trying to elect the person who will take over as Prime Minister after PM David Cameron steps down.
On Tuesday, the initial five candidates were knocked down to just three as Liam Fox dropped out with the smallest amount of votes, and Stephen Crabb followed due to a relative lack of support.
Both MPs have since decided to put their support behind frontrunner Theresa May. May notably won the first round of voting with over 50% of all 330 MP votes.
Indian Rupee (INR) Takes Advantage of Weak GBP, Low Oil Prices
With Sterling weak against most major currencies, the Indian Rupee was easily able to capitalise and strengthen against it during Wednesday’s session.
Perhaps more notably, prices of oil have been slumping since Tuesday, as global growth outlooks dropped due to Britain’s ongoing Brexit issues and shockwaves.
While many risky currencies typically fall in response to poor commodity news, the Indian Rupee tends to strengthen when oil prices weaken, as lower oil prices lead to cheaper oil imports for India.
The Indian Rupee has also seen something of a relief rally, after previously weakening considerably due to uncertainty around the Reserve Bank of India (RBI).
Investors had been shocked when RBI Governor Raghuram Rajan suddenly announced he would depart at the end of his current tenure – without announcing a successor.
GBP/INR Forecast: Sterling Likely to Continue Falling
As more property funds suspend withdrawing in order to protect assets from flooding out, the Pound continues to weaken considerably. Other property funds are speculated to follow in the coming weeks until markets calm – which could take some time to occur.
The Rupee, on the other hand, is likely to continue climbing if oil prices fall further due to Brexit-inspired market shock.
The Rupee could also rally following the announcement of RBI Governor Raghuram Rajan’s successor. Analysts currently anticipate that the successor could be named once Indian Prime Minister Narendra Modi returns from his tour of Africa.
GBP/INR was down around -0.6% on Wednesday, and trended in the region of 87.00.