The Indian Rupee to Pound (INR/GBP) Sterling exchange rate advanced to a one-month high on Friday as economists grew hopeful that a fall in oil prices would cause the Indian trade deficit to narrow over the coming weeks.
The Rupee strengthened as Bren crude prices slipped lower by 4.2% to $88.42 a barrel, the lowest level seen in close to four years. As India imports, 80% of its oil a lower price of the commodity will likely see the nation’s trade deficit narrow further in Septembers data.
‘The drop in oil prices means that India will have a better handle over its budget deficit and inflation, which is a huge positive for the Rupee. The currency is also getting supported by improving economic growth and the Fed’s dovish tone on interest rates,’ said Anish Vyas, a currency analyst at Mumbai based Angel Banking Ltd.
The cause for the slump in oil prices comes from falling demand for the commodity at a time when production is increasing in countries like Russia, USA and the OPEC nations.
Surprisingly the conflict in Iraq against the self-styled Islamic State has had little impact on prices as production in the South of Iraq remains unaffected and as Libyan oil re-entered the marketplace.
The currency was also continuing to find support from the International Monetary Fund’s report, which showed that the organisation has raised its 2014 growth forecast for the nation from 5.4% to 5.6% and increased its expectations for a growth rate of 6.4% in 2015.
Sterling softened after a report showed that UK house prices grew at the slowest pace in ten months in September, the data added to concerns that the nation’s economy is experiencing a slowdown.
Also weighing upon the Pound was a separate report, which showed that the UK’s construction sector saw output decline by 3.9% on a monthly basis.
Despite that, risk aversion allowed Sterling to push higher.
Indian Rupee to Pound Sterling Exchange Rate Forecast
The Indian Rupee could receive some support later in the session if the latest domestic Industrial and Manufacturing Production data comes in positively. Economists are widely expecting Industrial production to have risen by 2.6% on an annual basis but Manufacturing Production is expected to fall by -2.58%.
Further losses for the Pound were restrained however, as demand for riskier emerging market currencies such as the Rupee fell after the International Monetary Fund (IMF) warned that the global economy is slowing.
The Rupee is likely to go back on the retreat over the coming days despite the oil price and data releases as safe-haven demand looks set to increase due to the mounting fears over global economic growth.
Indian Rupee (INR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Indian Rupee,
,US Dollar,0.0163 ,
Indian Rupee,,British Pound,0.0102 ,
Indian Rupee,,Euro,0.0129 ,
Pound Sterling,, Indian Rupee,98.4850 ,
Euro,, Indian Rupee,77.5770 ,
US Dollar,, Indian Rupee,61.1900 ,
[/table]
