Indian Rupee Could Fall Further against the Pound (GBP/INR) on Continuing Emerging Market Woes

Pound to Indian Rupee (GBP/INR) Exchange Rate Climbs as Rupee Recovery Slows

The under-pressure Indian Rupee (INR) was recovering slightly this week from its all-time low against the US Dollar, but has since gone back into reverse gear.

The Pound Sterling to Indian Rupee (GBP/INR) exchange rate has been climbing today as positive news supports Sterling (GBP) won out against an uptick in global risk-sentiment.

After opening this week at the interbank level of ₹93.15, GBP/INR surged on some positive Brexit news and even touched a post referendum high of ₹94.87 on Wednesday, before sliding back once again.

GBP/INR is currently trending near the interbank level of ₹94.29, keeping it around half a Rupee below the pair’s best levels in over two years.

Some early-week tremors in emerging market currencies helped the Pound to easily capitalise on this Brexit news. As a result, even the late-week emerging market uptick wasn’t enough to knock GBP/INR back to the week’s opening levels again.

Pound (GBP) Exchange Rates Resilient on Hopes for Brexit Deal

Despite a cautious tone from the Bank of England (BoE) and its Governor Mark Carney this week, the Pound (GBP) has seen relatively sturdy performance thanks to UK-EU Brexit news.

At the beginning of the week, EU Chief Negotiator Michel Barnier expressed confidence that it would be ‘realistic’ for a UK-EU Brexit deal to be made within the next eight weeks.

This caused a surge in Pound demand and made investors more hopeful that the UK and EU were eager to reach some kind of Brexit deal, rather than allow negotiations to collapse and lead to a worst-case scenario ‘no-deal’ scenario.

The Bank of England left interest rates on hold its September policy decision on Thursday, but noted that Brexit fears were negatively impacting the UK business outlook.

On top of this, the bank played up concerns about US trade protectionism with BoE Governor Mark Carney saying that if a ‘no-deal Brexit’ occurred it could be as bad for Britain’s economy as the 2008 recession.

Ultimately though, as investors are becoming more hopeful that a no-deal Brexit will be avoided, the Pound has seen fairly strong support throughout the week.

Indian Rupee (INR) Exchange Rates Slip as Emerging Market Fears Continue

Emerging market currencies like the Indian Rupee (INR) have seen stronger demand since Wednesday, when the Central Bank of the Republic of Turkey (TCMB) hiked interest rates significantly.

This was seen as a strong response to the Turkish Lira’s (TRY) recent plummet and caused the Lira to surge, bringing other emerging market currencies up with it.

The Indian Rupee’s recovery rally slowed on Friday though, as the currency was weighed down by some mixed Indian WPI inflation data.

India’s August inflation WPI fell to 4.53% and the food WPI worsened from -2.16% to -4.04%.

On top of this, surging oil prices had a serious negative effect on the Indian Rupee. As a major oil importer, India is very sensitive to changes in the price of crude. Furthermore, as oil is traded in US Dollars, India has to ensure it has enough to cover its imports.

According to a senior dealer from a state-run bank:

‘Oil importers have been buying heavily today (Friday) taking advantage of the rally after a long time,

That along with other importer (Dollar) demand pushed the rupee below 71.80 level which was a key resistance level.’

Pound to Indian Rupee (GBP/INR) Investors Anticipate UK Inflation and Political Developments

Next week, the Pound (GBP) is still most likely to be driven by developments in Brexit negotiations, meaning GBP/INR’s biggest movement catalyst is likely to be political in nature.

Still, some key UK data due in the coming week could also prove influential if it surprises investors.

Wednesday will see the publication of Britain’s Consumer Price Index (CPI) inflation rate report for August.

If the inflation figure comes in lower than expected it could make investors concerned about UK monetary policy which would weaken the Pound outlook.

Towards the end of the week, Britain’s August retail sales figures, as well as India’s foreign exchange reserves may also influence the Pound to Indian Rupee (GBP/INR) exchange rate.

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Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard

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