Pound to Indian Rupee (GBP/INR) Exchange Rate Rallies, USD/INR Snaps four-days of Declines

On Monday the Rupee achieved an 11-month high against the US Dollar and rallied against the Pound as investors celebrated the Bharatiya Janata Party’s decisive election victory.

However, the currency snapped its recent run of gains as a result of concerns that the Rupee’s 2.5 per cent rally was excessive.

According to reports, importers have increased their Dollar purchases in order to trim some of the Rupee’s gains.

One local currency trader said of the Rupee’s movement; ‘State-owned banks are buying Dollars, which may be on behalf of oil importers. The BJP winning majority seats at the election is a positive, but we now have to see what kind of policies the new government will implement to boost the economy.’

Meanwhile, a recent report has intimated that the Reserve Bank of India is expanding its currency reserves in order to safeguard the Rupee from the kind rapid movement experienced last year.

Industry insiders have stated that RBI Governor Raghuram Rajan is engaged in a review of the central bank’s exchange rate policy.

In the view of a well-placed official; ‘In 2009, 2010 there was this great hands-off approach. But now we are thinking of reserve accretion. We need to prepare ourselves against any kind of storm that’s going to come up. [The RBI] has learnt its lessons. In the current situation where there are so many uncertainties like elections, global spillover, Fed fund rate hike, no amount of reserves is high’.

A stronger-than-expected increase in UK consumer prices was also responsible for the Rupee’s declines against the Pound.

The Pound was 0.63 per cent stronger against its Indian rival.

As the day continues USD to INR movement could occur in response to two economic speeches from Federal Reserve officials.

The only Indian economic data on the cards this week is the nation’s foreign reserves figures.

As a result, volatility in the emerging-market asset will be down to global economic developments.

Similarly, the direction taken by the Pound to Rupee (GBP/INR) exchange rate over the next few days is likely to be the result of the UK’s retail sales figures and Bank of England meeting minutes.