Indian Rupee to US Dollar (INR/USD) Exchange Rate climbs to weekly high as inflation eases

The Indian Rupee climbed to its highest level in a week and firmed against the Pound and other peers on Thursday after data showed that inflation eased more than forecast in February.

Data released by the Indian Central Bank showed that consumer inflation in the Asian nation made its smallest increase since 2012. Inflation ticked up 8.1% from the previous year a figure that was less than the 8.3% rise being forecast by economists.

“The bias will probably be to support growth at this point, but inflation will be closely monitored as risks are that food prices could rise again. There is no impetus for growth upswing, at least until elections are out of the way,” said an economist at DBS.

The Reserve Bank of India is expected to keep borrowing costs unchanged when it gathers of its next policy meeting on April 1st.

The currency’s rise was in contrast to Wednesday’s session which saw the Rupee and other emerging market currencies come under heavy pressure from concerns over global economic growth after China posted worse than expected trade data earlier in the week. The currency was also weighed upon by an increase in the demand for US Dollars by state run banks for defence purposes.

Today emerging markets recovered losses after economists deemed the recent run of sharp declines as overdone. They still remain vulnerable however and investors are keeping a nervous eye on the ongoing political standoff between the West and Russia over Ukraine.

“Global sentiment towards risk assets switched aggressively overnight and gains have continued this morning, with strong rises in Asian Markets,” said a currency strategist at Rand Merchant Bank.

The Rupee could see volatility later in the session as the market awaits the release of anticipated US retail and jobless claims data.