Profit taking saw Sterling slip against several of its rivals as the week drew to a close and the Pound to Indian Rupee (GBP/INR) exchange rate trimmed 0.4% on Friday.
However, despite putting on a show of strength against the Pound, the US Dollar to Indian Rupee pairing achieved a six-week high of 60.45 as investors ditched the emerging-market asset amid a slide in risk sentiment.
The appeal of emerging-market assets was significantly reduced after it emerged that a Malaysian passenger jet was brought down on the border between Ukraine and Russia.
While no definitive answers regarding who might be responsible for the tragic development have been provided, for many industry experts this event could prove to be a game-changer.
The situation between Russia and Ukraine (and consequently, Russia and the US and EU) has been tenuous for months but until now responses to the latter nation’s support of separatist action have been mild.
That could all change if it is proven that the Malaysian craft was brought down by a missile fired by militants.
One US official had this to say of the development; ‘This could be just what it takes to make the Russian’s step back. This is just what [Russian President Vladimir] Putin didn’t want but it’s the kind of scenario that becomes more likely when you give a lot of undertrained and unreliable people sophisticated weaponry.’
The situation caused violent movement in both the commodity and currency markets.
Initially, investors flocked to safe-haven assets amid concerns that the situation could rapidly and decisively escalate.
However, demand for currencies like the US Dollar, Japanese Yen and Swiss Franc waned and their higher-risk rivals (like the Rupee) were able to recoup some of their losses.
That being said, the Rupee remained in a softer position against the US Dollar. In the opinion of the Veracity Group’s CEO, Pramit Brahmbhatt; ‘Rupee continued to trade in a tight range to slightly weak as Dollar demand from state run banks for oil importers and defence related payments balanced out the positive local equities. Expect Rupee to appreciate in coming days if the local equities continue to trade higher.’
The US Dollar to Indian Rupee exchange rate hit a low of 60.2400 before trending in the region of 60.2650 ahead of the publication of the US University of Michigan Consumer Confidence Index.
As the sentiment gauge is expected to show improvement in July, the US Dollar could enter the weekend in a slightly bolstered position.
The Pound Sterling to Indian Rupee exchange rate, on the other hand, was trading around the 103.1310 level after recouping some of its initial losses.
Friday’s Indian Foreign Reserves, Deposit Growth and Bank Loan Growth data could have a slight impact on the GBP/INR and USD/INR pairings later today.
With reports from India severely lacking next week, any volatility in the Pound to Indian Rupee exchange rate will be the result of UK developments, including the nation’s retail sales figures and the publication of minutes from the Bank of England’s latest policy meeting.
Indian Rupee (INR) Exchange Rates
|Pound Sterling||Indian Rupee||103.1310|
|US Dollar||Indian Rupee||60.3100|
|Australian Dollar||Indian Rupee||56.5820|
|New Zealand Dollar||Indian Rupee||52.3520|