Indian Rupee to US Dollar (INR/USD) Exchange Rate Declines for a Fifth Day
On Wednesday the Indian Rupee to US Dollar (INR/USD) exchange rate extended declines for a fifth day. The Rupee shed 14 paise as investors looked ahead to the upcoming publication of minutes from the latest Federal Open Market (FOMC) policy meeting.
Hawkish minutes could drive the INR/USD pairing lower.
Earlier…
The Indian Rupee to US Dollar (INR/USD) exchange rate fell to its lowest level for a month on Tuesday as local investors sold foreign assets.
Although the Pound was generally trending in a weaker position off the back of the UK’s Consumer Price Index, the INR/GBP exchange rate was little changed during the European session.
With economic reports for India in short supply this week, further Rupee movement will be the result of global economic developments and fluctuations in the price of crude oil.
When speaking of the Indian Rupee’s exchange rate forecast, the HSBC’s Dominic Bunning noted; ‘We do not expect INR volatility to pick-up as much as some would expect in the market. The Reserve Bank of India has made it clear in number of their statements that they are trying to curb volatility in the currency between 60-63/USD ranges versus the US Dollar. We would expect that range to hold given that the RBI has a lot more policy flexibility now than it did in the past given the size of FX reserves, given that inflation has come down quite significantly and given the broader current account deficit. We do think that volatility will be managed by the RBI. We do not expect any aggressive rupee weakness from here.’
That being said, the release of minutes from the Federal Open Market Committee’s (FOMC) recent policy meeting could cause Rupee softness tomorrow.
If the minutes are hawkish regarding the prospect of a US interest rate hike, emerging market currencies like the Rupee could slide.
The USD/INR exchange rate hit a low of 61.6950
Pound Sterling to Euro (GBP/EUR) Exchange Rate Trending around 1.24
Before the release of the Bank of England meeting minutes, the Pound Sterling to Euro (GBP/EUR) exchange rate consolidated its position at the 1.2450 level.
If the minutes prove to be as dovish as investors expect, the British currency could post additional declines over the next few hours.
Earlier…
Although the pace of UK Consumer Price gains was shown to have increased in October, the Pound Sterling to Euro (GBP/EUR) exchange rate fell below 1.25 on Tuesday.
The GBP/EUR exchange rate brushed a low of 1.2478 during the European session as investors bet that UK inflation will resume its downtrend and fall below 0.1% in the next six months.
Weakness in the Pound to Euro pairing was also occasioned by unexpectedly upbeat economic sentiment reports for Germany and the Eurozone as a whole.
The Pound shed 0.6% against the Euro and over 0.5% against the Swiss Franc but managed to hold steady against the US Dollar (GBP/USD).
Tomorrow Sterling could experience considerable movement as the Bank of England (BoE) publishes its meeting minutes.
If the minutes push back rate-hike expectations even further, the Pound to Euro (GBP/EUR) exchange rate could fall to fresh lows.
Economists will particularly be focusing on whether two members of the Monetary Policy Committee continued to vote in favour of an immediate interest rate increase.
The GBP/EUR exchange rate was trending in the region of 1.2417
South African Rand to US Dollar (ZAR/USD) Exchange Rate Jumps to a Two-Week High
On Tuesday the South African Rand to US Dollar (ZAR/USD) exchange rate rallied to a two-week high in response to increased demand for higher-yielding assets.
With investors turning away from the safe-haven Yen in response to the news that Japan slid into recession in the third quarter, riskier assets like the Rand were able to advance.
In the view of one forex trader; ‘The Rand is stronger because high yields are in vogue at the moment.’
Analyst Anisha Arora also stated; ‘The global backdrop will continue to drive the direction of Rand. We see some downside protection from importers, while the fundamental backdrop keeps Dollar/Rand a buy on dips.’
Tomorrow considerable South African Rand movement could occur as a result of the publication of South Africa’s inflation data.
The pace of consumer price gains is believed to have slowed in October on the year, easing from 5.9% to 5.7%. If that proves to be the case, it could affect the South African Reserve Bank’s interest rate decision on Thursday.
Of course, the FOMC minutes will also be of interest to investors with an interest in the ZAR/USD exchange rate.
The US Dollar to South African Rand (USD/ZAR) exchange rate achieved a high of 11.1297
