The Rupee slid against the US Dollar during local trading as concerning Indian inflation data reduced the appeal of the emerging market asset. However, the Rupee held its own against a struggling Pound.
Although the Rupee has been receiving underlying support from the upcoming Indian election and a period of comparative calm in the currency market, the asset came under pressure as Ukraine inspired risk aversion deterred investors.
Rupee losses were also triggered as India’s wholesale price data showed an annual increase of 5.7 per cent in March, up from a year-on-year reading of 4.68 per cent the previous month.
Economists had expected wholesale inflation to increase by 5.3 per cent.
Separate consumer-price figures are projected to show a quickening in gains from 8.10 per cent to 8.25 per cent.
Meanwhile, India’s industrial production report had previously revealed contraction of 1.9 per cent in February, year-on-year. As economists had expected expansion of 0.9 per cent this result was particularly disappointing.
Manufacturing output was down by 3.7 per cent.
One Mumbai-based industry expert said this of the figures and the Rupee’s subsequent movement; ‘Wholesale inflation is above market consensus and that is weighing on the Rupee. The industrial production data have not been supportive for the currency.’
As local trading continued the Rupee edged down to 60.3250 against the US Dollar and slipped against peers like the Pound and Euro.
However, Sterling gains were limited as UK consumer price data showed that inflation slowed to 1.6 per cent last month – its lowest for over 4 years.
UK inflation has been below the Bank of England 2 per cent target for three months and adds to the case for the central bank holding interest rates at record lows for the foreseeable future.
The result was in-line with economists’ expectations, although the UK’s retail price index advanced by 0.2 per cent in March month-on-month rather than the 0.3 per cent gain forecast.
The next lot of Indian data to watch out for (the nation’s foreign reserves, deposit growth and bank loan growth) is due out on Friday.
Until then Pound to Rupee (GBP/INR) movement may be inspired by UK employment figures.
The Rupee did recover some ground against the US Dollar as trading continued, but could shed gains depending on the content of a speech to be given shortly by Fed Chairman Janet Yellen.
As a high-risk currency, Rupee fluctuations could also be triggered by any developments in the Ukraine situation.
Of course, US data (including today’s inflation figures) will also be of interest.
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,100.7670,
US Dollar,,Indian Rupee,60.2600,
Euro,,Indian Rupee,83.1338 ,
Australian Dollar,,Indian Rupee,56.5962,
New Zealand Dollar,,Indian Rupee,52.1155,
[/table]
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