Although the Pound dipped against several of its rivals on Tuesday, the Pound to Rupee exchange rate was able to post a modest advance as risk aversion dominated the market.
The news that the US launched airstrikes on Syria saw investors pull out of higher-risk and emerging market assets, and demand for safer havens was consolidated when Israel shot down a Syrian fighter jet.
According to one Mumbai-based currency trader; ‘The Rupee weakened due to the deteriorating geopolitical situation in the Middle East.’
As well as declining against the Pound the Rupee weakened against the US Dollar for the first time in six days, shedding 0.2%.
Prior to this development, the Rupee had managed to strengthen in reaction to the first piece of positive Chinese data for several weeks.
A run of disappointing Chinese figures, including a concerning industrial output figure, seemed to indicate that growth in the world’s second largest economy is slowing. While the Chinese government has introduced some stimulus measures, many have argued that the steps taken aren’t going to be enough.
As HSBC currency strategist Robert Lynch noted; ‘The China story is important, and so seeing some weakness in these currencies at a time when some of these commodity prices are under pressure, I certainly would put it as a factor.’
The Pound Sterling to Indian Rupee exchange rate hit a low of 99.3510
However, China’s Manufacturing PMI didn’t fall from 50.2 to 50.0 as forecast, but actually rose further above the 50 mark separating growth from contraction and achieved 50.5.
While the report exposed some weaknesses in the sector, the result was enough to see commodity-driven and emerging-market assets climb before the Syria situation put investors off.
The Pound Sterling to Indian Rupee exchange rate hit a high of 100.0320
The Pound, meanwhile, initially came under pressure from disappointing UK BBA Loans for House Purchase figures and less-than-impressive Public Finance figures.
The public finance figures showed that Britain’s budget deficit widened in the April to August period, climbing from 42.8 billion Pounds in the same period of the previous year to 45.4 billion Pounds.
In what will be viewed as a bit of a blow to Chancellor of the Exchequer George Osborne, August’s budget deficit widened from 11 billion Pounds to 11.6 billion. The data prompted this comment from economist Howard Archer; ‘While all of these changes may make comparative analysis of the public finances initially more confusing, the message essentially remains the same: the chancellor has a mighty tough job to meet his fiscal targets for 2014/15.’
However, while Sterling spent much of the European session trending lower against its peers, the British currency was able to take advantage of the shift in risk sentiment and stage a modest rally.
GBP/INR Exchange Rate Forecast
The Pound to Rupee exchange rate could extend gains if the situation in Syria intensifies, although a lack of economic data for either the UK or India may restrain the GBP/INR pairing somewhat.
GBP/INR volatility is more likely to be occasioned on Thursday when the UK releases Nationwide House Price figures and the Confederation of British Industry publishes its Reported Sales data.
Of course the big news of the day will be Mark Carney’s speech in Wales. Any dovish remarks would be detrimental to the Pound, but the asset could surge if the BoE chief is hawkish.
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Indian Rupee, 99.9930,
US Dollar,,Indian Rupee,60.9630,
Euro,,Indian Rupee,78.5080,
Australian Dollar,,Indian Rupee,54.0920,
New Zealand Dollar,,Indian Rupee,49.5590,
[/table]
