Overnight the Rupee cast off the bedraggled image it’s frequently adopted over the last few months and made a steady advance against the US Dollar. The emerging-market asset went on to extend gains during the local session.
Although the currency has enjoyed a steadier few weeks since Raghuram Rajan took over as Governor of the Reserve Bank of India, his shock decision to increase interest rates have kept the Rupee under pressure.
The US Dollar to Indian Rupee Exchange Rate was in the region of 62.3250 as of 10:50 GMT
However, several factors helped the Indian asset’s advance on the ‘Greenback’, including the US government’s failure to reach an agreement over the nation’s budget and data showing India’s current account deficit widened by less than expected.
In the second quarter the deficit came in at 21.8 billion Dollars. While this was up from the 18.1 billion Dollars recorded the previous quarter, economists were expecting a gap of 23 billion Dollars, so the result was a mildly positive one.
The Rupee advanced to 62.2675 against its North American counterpart after the data was published, and the result prompted this response from strategist Tirthankar Patnaik; ‘Concerns over deficit financing are alleviating due to improvement in the trade deficit in recent months and steps by the central bank to boost dollar inflows.’
Similarly, one Mumbai-based economist observed; ‘The current-account deficit will continue to show improvement and this leads us to believe that significant depreciation bias for the Rupee is over for now.’
The result also helped the Rupee gain on the Pound and Euro.
The US Dollar to Rupee (USD/INR) exchange rate hit a low of 62.1550
The Rupee was even able to retain gains despite a slightly underwhelming HSBC manufacturing PMI report for India. Whilst the data showed that PMI remained below the 50 mark separating growth from contraction, it did rise to 49.6 in September as new orders and output contracted at slower rates.
In less positive news, the report showed the first drop in employment for almost twenty months.
In a statement published with the figures chief economist Leif Eskesen commented; ‘Manufacturing activity continued to shrink in September, albeit at a slower pace. Order flows remain weak, especially export orders, and employment fell. Moreover, businesses cut back quantity and stocks of purchases. While output prices rose at a slower pace, input process rose markedly, as the effects of the weaker exchange rate continue to pass through. Despite the weak growth readings, the build-up in underlying inflation pressures suggests that the RBI has to keep its inflation guards up.’
Additional movement in the USD/INR pairing could occur today as a result of US ISM manufacturing data, but investors will be largely focusing on US political concerns.
Current Rupee (INR) Exchange Rates:
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The Pound Sterling/ Indian Rupee Exchange Rate is currently in the region of: 101.1900 <
The Euro/Indian Rupee Exchange Rate is currently in the region of: 84.4458 <
The US Dollar/Indian Rupee Exchange Rate is currently in the region of: 62.3250 <
The Australian Dollar/Indian Rupee Exchange Rate is currently in the region of: 58.6851 >
The New Zealand Dollar/Indian Rupee Exchange Rate is currently in the region of: 51.7360 <
The Canadian Dollar/Indian Rupee Exchange Rate is currently in the region of: 60.4342 <
(Correct as of 10:50 GMT)
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