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Pound Rupee Exchange Rate (GBP/INR) Falters Following Data-Heavy Day; USD/INR Weakens

June 4, 2014 - Written by Toni Johnson

GBP/INR Exchange Rate Falters following a Data-Heavy Day, USD/INR Weaker - Rupee Supported by Domestic Developments - The Pound to Rupee (GBP/INR) exchange rate edged lower on Wednesday and the Rupee advanced on a struggling US Dollar. Today’s HSBC composite output index for India showed a recovery in the nation’s private sector, with the gauge rallying to 50.7 in May from 49.5 in April. This took the figure back into expansion territory for the first time in three months.

The nation’s services PMI was up from 48.5 to 50.2 last month, finally posting a growth reading after eleven months of contraction. A rebound in new orders helped the service sector’s recovery, although the recent national election was cited as hampering growth.

Confidence improved among domestic service providers, with optimism regarding the sector’s performance over the next year rising.

HSBC economist Frederic Neumann said this of the report; ‘At last, a gradual improvement in services activity, with the index creeping above the 50 level [...] Fortunately, this momentum will be further supported by the strong election results. However, the RBI is likely to retain its hawkish stance given the increased risks attached to inflation.’

The report showed that private sector cost inflation fell to a 12-month low.

RBI Action Supports Rupee Exchange Rate

The Rupee was also supported against the Pound as a result of yesterday’s intervention by the Reserve Bank of India.

On Tuesday the RBI announced that foreign investors could participate in currency derivatives in order to entice inflows of US Dollars. The central bank relaxed overseas remittance rules and helped the Rupee rally by 8 paisa against the US Dollar.

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The Rupee achieved a high of 59.2000 against the US Dollar on Wednesday and briefly brushed 98.8403 against the Pound.

The GBP/INR exchange rate had a muted response to the UK’s services and composite PMI reports – both of which showed a slight slowing in the pace of growth in May.

Data Flop Pushes US Dollar (USD) Lower

During North American trading, the Rupee pushed higher against the US Dollar as investors turned from the latter asset in response to less-than-impressive US data.

The appeal of the US Dollar was significantly reduced as the ADP employment report showed that the US economy added fewer positions than expected in May.

An employment gain of 210,000 had been envisaged, but the number of people in work increased by just 179,000.

In the view of global-markets strategist Michael Woolfolk; ‘Markets are taking a negative Dollar view on the data just now. It’s not stacking up to be a particularly good month for employment.’

On Friday the US non-farm payrolls report will be published and there’s every chance that that data will also disappoint.

Meanwhile, a 3.2 per cent quarterly decline in US non-farm productivity was recorded and domestic mortgage applications were shown to have faltered by 3.1 per cent.

In another showing of bad US news, the trade deficit for the world’s largest economy was shown to have expanded to a two-year high in April.

The deficit widened by 6.9 per cent in response to a sharp increase in the consumption of imports.

Global Data to Trigger Rupee Movement

With just Indian foreign reserves figures to be aware of over the next two days, any Rupee volatility will be occasioned by global economic developments – with US news being of particular note.

US reports worth following include the Federal Reserve’s beige book, initial jobless claims figures and the nation’s unemployment rate, labour force participation and consumer credit data.

As regards the GBP/INR exchange rate, the Bank of England’s rate decision and the UK’s own trade data will have an impact.

The US Dollar to Indian Rupee exchange rate is trading value +0% at 61.20500 USD/INR.
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