Pound to Indian Rupee (GBP/INR) Exchange Rate Advances Following Manufacturing Reports

Investors might be turning to safe-haven assets in the wake of the escalating crisis in the Ukraine, but the emerging market Rupee was able to hold steady against peers like the Pound, Euro and US Dollar.

The Rupee was supported by last week’s upbeat Indian data and indications that the global economic crisis is entering a calmer, more stable stage.

Today the Indian currency rallied as the domestic HSBC manufacturing PMI came in at 52.5 for February, up from 51.4 in January and better than the 51.7 reading forecast.

The measure remained above the 50 mark separating growth from contraction and indicated that the nation’s manufacturing sector is strengthening.

According to the data, output and new order growth achieved 12 month-highs and work from abroad expanded at a solid pace.

In a statement published with the figures chief economist Leif Eskesen noted; ‘Manufacturing activity picked up further in February. New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer. This, in turn, has provided a lift to output growth.’

But Eskesen went on to say; ‘However, the recovery in activity is still likely to prove protracted given the lingering structural constraints. Moreover, underlying inflation pressures remain potent […] This will keep the Reserve Bank of India hawkish and likely compel it to raise interest rates a bit further this year.’

While the Rupee advanced on the Pound after the data was published, gains were limited due to Sterling being boosted by upbeat British data.

One report showed that UK mortgage approvals climbed to the highest level since the final quarter of 2007 while another revealed stronger-than-forecast UK manufacturing sector expansion.

UK manufacturing PMI advanced from 56.7 in January to 56.9 in February, slightly better than the 56.8 forecast.

The Rupee managed to retain its advance against the US Dollar ahead of the publication of US personal spending and ISM manufacturing figures.

As the week continues developments in the Ukraine will be responsible for driving currency market movement, but Indian data (including Wednesday’s services PMI and Friday’s bank loan growth report) will also have an impact on the Rupee.