After slumping to a week low against the US Dollar in a risk-off environment, the Rupee was able to recover ground before the close of local trading.
India’s currency was also able to strengthen against a struggling Pound thanks to a positive domestic inflation report.
India’s wholesale price index rose by 4.68 per cent in February, year-on-year, a slower pace than forecast and a nine-month low.
Overall inflation dipped for a third consecutive month in February and fell to a 25 month low.
The news alleviates some of the pressure on the Reserve Bank of India and helped the Rupee advance on the Pound. If inflation can be contained the central bank may not have to continue raising interest rates to ease inflation concerns.
The report is the last major piece of Indian data to emerge from the nation before the RBI policy review at the beginning of April.
Economist A. Prasanna said of the figures; ‘For policy, CPI is more relevant and based on latest CPI reading, we expect RBI to keep rates steady in the April policy review.’
Conversely, another industry expert voiced this opinion to Reuters News Agency; ‘This may sound hawkish but if the Governor is truly committed to crushing inflation expectations much higher rates are likely to be required in time.’
Core wholesale price index inflation climbed from 3 per cent to 3.15 per cent in February.
While the Rupee advanced on the Pound on Friday its relationship with the US Dollar remained slightly tempestuous as a result of Ukraine-inspired risk aversion.
On Sunday Crimea will hold a referendum to decide whether it will remain part of the Ukraine or return to Russia.
The outcome of the vote could have serious and extensive repercussions.
Consequently, investors are avoiding higher-risk assets like the Rupee and placing their faith in safe-haven currencies like the US Dollar and Yen.
If today’s US University of Michigan confidence index shows an improvement in sentiment the Rupee could edge lower against the US Dollar before the weekend.
GBP/INR movement may occur next week in response to domestic bank loan growth and foreign reserves data, but economists will largely be focusing on UK employment figures and the tone adopted in the Bank of England’s latest policy meeting minutes.
An impressive UK employment gain could boost the Pound against peers like the Rupee.
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,101.5630,
US Dollar,,Indian Rupee,61.1900,
Euro,,Indian Rupee,84.9134 ,
Australian Dollar,,Indian Rupee,55.2117,
New Zealand Dollar,,Indian Rupee,52.2769,
[/table]
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