Pound to Indian Rupee (GBP/INR) Exchange Rate Higher as Indian Services Sector Contracts

The Rupee began Wednesday trading in a tight range against several of its main currency counterparts.

The emerging-market currency had posted gains as demand for higher-risk assets rose in response to a quelling of invasion fears in Ukraine. Although the Rupee’s advance was modest, the currency was able to strengthen against the Pound and US Dollar.

Rupee forwards edged away from an over one-week low as tensions eased.

As the local session progressed the Rupee was supported by the news that India’s private sector expanded for the first time since mid-2013.

The HSBC India composite output index came in at 50.3 in February, up from 49.6 in January and just above the 50 mark separating growth from contraction.

However, the nation’s services index only advanced from 48.3 to 48.8, meaning that it remains stubbornly below the growth marker.

In a statement issued with the figures economist Leif Eskesen commented; ‘Service sector activity continued to stabilize, but the PMI reading remains below the water line and point to weak growth conditions. While inflation for input prices eased a bit, it picked up for prices charged as businesses passed on higher costs to clients. Despite the weak growth backdrop, the RBI will have to keep its inflation guards up to address lingering inflation pressures.’

Eskesen went on to add; ‘Moreover, fiscal policy tightening to meet the deficit target will hold back government spending. This suggests that growth will remain subdued in coming months.’

During the European session the Pound advanced on the Rupee as the UK’s services PMI declined by less-than-forecast.

Economists had expected the measure to dip from 58.3 to 58.0 but it actually came in at 58.2 in February, still well above the 50 mark separating growth from contraction.

Sterling had been little-affected earlier in trading by a larger-than-predicted decline in the British Retail Consortium’s shop price index.

On Friday Indian deposit growth and bank loan growth figures could trigger Rupee movement, but the direction the currency takes for the rest of the week is more likely to be dictated by global developments.

Of course the situation in Ukraine will be of particular interest, but investors will also be focusing on Friday’s US non-farm payrolls report.