Yesterday the Rupee weakened against peers like the US Dollar as Indian inflation hit a seven-month high, piling additional pressure on the Reserve Bank of India. The emerging-market asset struggled to recover ground overnight and continued trading lower against its US peer as hopes of US lawmakers bringing the Federal shutdown to an end rose.
The US Dollar to Indian Rupee Exchange Rate was in the region of 61.82500 as of 12:55 GMT
But despite this week’s show of softness, recent reports indicate that the new Governor the RBI has completely turned the Rupee’s fortunes around.
By stepping up the central bank’s efforts to stem inflation and stimulate growth, Raghuram Rajan has halted the currency’s previously dramatic decline and helped it strengthen considerably against peers like the US Dollar.
In recent weeks the Rupee has rebounded from the record low hit in August and investors are becoming increasingly confident in the emerging market asset.
As currency and rates strategist Geoffrey Kendrick comments; ‘We no longer have a crisis of confidence. The new RBI Governor has market credibility. For now, he’s saying all the right things.’
Rajan’s decision to surprise investors and increase the benchmark interest rate has seen the Rupee climb by 11 per cent against its North American counterpart.
The US Dollar to Rupee (USD/INR) exchange rate hit a low of 61.2700
Today the Rupee also benefited as US lawmakers moved closer to making a debt ceiling deal and investors speculated on the odds of sales of local stocks increasing.
In the words of one Mumbai-based industry expert; ‘A debt deal will be a huge relief and have a direct impact on emerging markets.’
Yesterday representatives from both factions of the US government intimated that notable progress had been made in reaching a viable agreement.
However, while the Rupee initially edged higher against its North American counterpart as the likelihood of the world’s largest economy defaulting declined, the US Dollar later recouped losses – strengthening against its higher-risk peers.
But ‘Greenback’ gains were more notable against developed market currencies like the Euro, and the USD/INR pairing is likely to remain under pressure in the hours and days ahead.
Foreign-exchange strategist Lee Hardman observed; ‘The Dollar seems to be deriving some support against the other major currencies as investor expectations rise that an agreement might be in the offing to raise the debt ceiling. [But] The Dollar will underperform against the higher-yielding currencies as risk sentiment improves.’
With Indian markets closed for the Idul Juha celebrations Rupee movement may be a little limited, but any announcements from the US are likely to inspire volatility.
Current Rupee (INR) Exchange Rates:
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The Pound Sterling/ Indian Rupee Exchange Rate is currently in the region of: 98.4563 >
The Euro/Indian Rupee Exchange Rate is currently in the region of: 83.4980 >
The US Dollar/Indian Rupee Exchange Rate is currently in the region of: 61.8250 >
The Australian Dollar/Indian Rupee Exchange Rate is currently in the region of: 58.93211 >
The New Zealand Dollar/Indian Rupee Exchange Rate is currently in the region of: 51.8213 >
The Canadian Dollar/Indian Rupee Exchange Rate is currently in the region of: 59.6891 >
(Correct as of 12:55 GMT)
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