Emerging market currencies like the Rupee have been enjoying something of a revival of late, recovering from the declines initially triggered by the Fed’s decision to taper stimulus.
The Rupee has also been broadly strengthening as a result of optimism surrounding the upcoming Indian election.
Hopes that the opposition will be victorious and lead India towards a more economically sustainable future have been lending the Rupee underlying support in recent weeks, and the currency posted its biggest gain for April as local trading opened.
Meanwhile, the International Monetary fund released a report on Tuesday which estimated that India will record economic growth of 5.4 per cent in 2014, up from expansion of 4.4 per cent the previous year.
The outlook for Asia as a whole was also brighter, with annual growth of 6.7 per cent projected.
Although China remains an area of concern, Indonesia is showing resilience. According to HSBC economist Frederic Neumann; ‘It’s a relative story. Asia looks as if it’s shining again but there is clearly a rotation within emerging markets into Asia but that doesn’t mean we should cast away all worries.’
The Rupee to US Dollar (INR to USD) Exchange rate strengthened to 60.0050 with the Rupee advancing on rivals like the Pound as Indian markets reopened following yesterday’s national holiday.
Bloomberg News quotes forex expert Amogh Moghe as saying this of the Rupee’s upward trend; ‘The IMF report is positive as growth in emerging markets is likely to be higher, which supports the case of continued foreign inflows into the region. The Dollar’s weakness against most Asian currencies is also boosting the Rupee. There are some bunched-up inflows after yesterday’s holiday, which too are supporting the currency.’
However, Rupee gains against the Pound were limited as a report showed that the UK’s trade deficit narrowed in February, leaving the Pound to Rupee (GBP to INR) exchange rate around 100.5540.
The 2.2 per cent decline in British imports outpaced the 1.6 per cent decline in exports and Britain’s trade deficit narrowed from 9.5 billion Pounds in January to 9.1 billion Pounds in February.
Sterling strengthened after the data was released and advanced on the Rupee.
All of this week’s influential Indian data, including the nation’s trade balance and industrial/manufacturing production figures, is due for release on Friday.
Until then Rupee movement may be caused by global economic developments.
The publication of minutes from the Federal Open Market Committee policy meeting will be of particular interest, but investors concerned with the GBP to INR exchange rate will also be focusing on tomorrow’s Bank of England rate decision.
The Rupee shed some of its gains and edged away from recent highs against the US Dollar (USD) as local trading progressed.
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,100.5540,
US Dollar,,Indian Rupee,60.0500,
Euro,,Indian Rupee,82.9137 ,
Australian Dollar,,Indian Rupee,56.2888,
New Zealand Dollar,,Indian Rupee,52.2168,
[/table]
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