During the local session the emerging-market Rupee advanced on several of its most traded rivals and moved away from a recent two-month low against the US Dollar as the currency was boosted by a surprise decision from the Reserve Bank of India.
The Rupee rallied after the Indian central bank unexpectedly pushed the repurchase rate from 7.75 per cent to 8 per cent, going against the expectations of economists for no change.
In an accompanying statement the financial body said that it has no plans to introduce additional policy tightening in the short-term.
The RBI decision was supported by industry experts like chief executive Andrew Holland. Holland noted; ‘The RBI did what was needed. The rate increase will help the Rupee if the Fed tapers more.’
While the Rupee benefited from this development, persistent weaknesses in the Indian economy continue to weigh on the asset.
According to the RBI; ‘Growth in 2013-14 is likely to be somewhat weaker than the earlier projection as signs of a pick up are yet to emerge. Improved confidence and actions to support infrastructure projects could translate into a slow-paced recovery in 2014-15 provided these actions are sustained. The persistence in high inflation continues to pose a challenge to growth over the medium term’.
Rupee gains were a little tempered by this dovish statement and the Indian asset later trimmed its advance against the Pound as the British asset was boosted by upbeat UK growth data.
News that the UK recorded the best annual growth for five years in 2013 helped Sterling strengthen against the majority of its currency counterparts.
While Friday’s foreign reserves report for India will be of interest, the conclusion of the Federal Open Market Committee’s two day policy meeting will be the main cause of additional market movement this week.
If the Fed defies forecasts and refrains from tapering stimulus by the 10 billion Dollars expected emerging market assets like the Rupee could surge.
Friday’s UK consumer confidence data could also impact the GBP/INR pairing before the weekend.
Indian Rupee (INR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Indian Rupee,103.7420 ,
US Dollar,,Indian Rupee,62.5700 ,
Euro,,Indian Rupee,85.7279 ,
Australian Dollar,,Indian Rupee,55.1381,
New Zealand Dollar,,Indian Rupee,52.0343 ,
[/table]
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