The Indian Rupee (INR) exchange rate declined against the Pound (GBP) and slid against the US Dollar (USD) on Wednesday as emerging market and higher yielding assets took a beating as currency market volatility hit its strongest level since February.
Economist expectations are increasing that the Federal Reserve will raise interest rates sooner than initially expected as economic data out of the world’s largest economy continues to come in positively. As a result the Fed is forecast to end its monthly bond buying programme by October, a move that will weigh on emerging assets as they have benefitted from investors favouring higher yields.
Rumours of potential Federal Reserve interest hikes tend to have an impact on emerging markets given that the easy monetary stance from the U.S. central bank has sparked big foreign inflows. In India, overseas funds have bought a net $32.50 billion worth of debt and shares so far this year.
‘There’s some risk aversion and the Rupee’s move is in line with what other emerging-market currencies are doing,’ said Shirish Garodia, manager for foreign exchange and rates at the Mumbai based Edelweiss Financial Services Ltd.
The concerns were enough to send the Rupee weaker against the battered and bruised Pound on Wednesday. The UK currency is continuing to come under sharp pressure over increasing concerns that Scotland will choose to the leave the 300-year old United Kingdom at next week’s independence vote.
The Pound was able to hold onto gains against the Rupee despite jitters that an eagerly awaited Scottish opinion poll. The poll, by Survation, is due to be released at 10.30pm GMT, and the company itself says that the results are “very interesting”.
Pound Sterling to Indian Rupee Exchange Rate Forecast
Sterling is forecast to remain under heavy pressure until the outcome of the September 18 referendum is known. If the pro-union side wins than the Pound will likely strengthen if the opposite occurs then we can expect a sharp decline. Some economists are warning that if Scotland does vote in favour of independence then the implications for the Pound could be ‘horrific’.
The Rupee meanwhile is also likely to remain lower against the US Dollar until the Federal Reserve’s next policy meeting. Economists will be looking for signs that the Central Bank is edging closer to announcing a rate rise and an end to its bond-buying programme.
UPDATE
In a quite news day for both India and the UK, the Pound Sterling to Indian Rupee exchange rate advanced by almost 0.2% purely in response to another twist in the Scottish referendum tale.
While the weekend’s YouGov poll but nationalists in the lead (a result which triggered extensive Pound Sterling losses) a poll conducted by Survation showed unionists having a 6% lead.
The Pound accordingly rallied against the majority of its currency counterparts.
With several high-profile economic reports for India scheduled for publication tomorrow additional GBP/INR movement can be expected to take place 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 ,
Indian Rupee,
,US Dollar,0.0164 ,
Indian Rupee,,British Pound,0.0101 ,
Indian Rupee,,Euro ,0.0127 ,
Pound Sterling,, Indian Rupee,98.392 ,
Euro,, Indian Rupee,78.678 ,
US Dollar,, Indian Rupee,60.9601 ,
[/table]
