Pound to Indian Rupee (GBP/INR) Exchange Rate firmer as Dollar demand weighs on Rupee

The Indian Rupee was trading softer against the Pound on Monday as volatility in the currency climbed to a one-week high as the Indian Central Bank governors views on inflation diverged from the nation’s finance minister and as speculation increased that the demand for Dollars will exceed supply.

Volatility for the Rupee climbed on speculation that oil companies will be seeking to purchase US Dollars and Indian exporters seek to repatriate overseas earnings before the end of March.

“We are seeing demand from oil importers. The Rupee will stay range bound unless there are some massive global or local cues. There was nothing surprising from this week’s G20 summit”, said Vikas Babu, trader at Andhura Bank in Mumbai.

Elsewhere the Indian Central Bank Governor Raghuram Rajan warned that inflation remains the biggest threat to growth in the Indian economy. His comments diverged from the nation’s finance minister who highlighted the fact that prices were actually falling.

On the 28th January Rajan surprised markets by raising the policy rate to 8% from 7.75% saying that consumer price inflation was the biggest threat to the Rupee.

The Rupee did find some support as risk aversion eased due to the easing of tensions in Ukraine. Last week’s violence which saw up to 88 people killed was replaced by a nervous sense of optimism as the nation’s interim government voted to remove President Viktor Yanukovych. The latest development was that an arrest warrant was issued for his capture.

With no major domestic data due for release until Friday the Rupee will be at the mercy of international factors. The end of the week will cause volatility due to the publication of the latest GDP growth rate report for India. The economy is forecast to have grown by 4.2%, down from the previous reading of 4.8%.