Indian Rupee stronger on risk on trading

April 8, 2015 - Written by Tim Boyer

STORY LINK Indian Rupee stronger on risk on trading

The Indian Rupee made gains against the US Dollar after it and other riskier assets found support from increased demand from investors. Risk appetite was bolstered by expectations that the US Federal Reserve will delay hiking interest rates. Previously, investors had been expecting the Fed to begin raising rates in the summer, but a string of disappointing economic data releases out of the world’s largest economy has caused doubts to surface. A rate rise is now not forecast to occur until the end of the year.

‘Rupee gains have been helped by an ongoing risk-on tone in global markets following the payrolls figure. It seems that large inflows and a Rupee positive bias might remain as long as expectations remain that the Fed will hike only late in the year,’ said a currency strategist.

Last Friday saw the publication of worse than forecast US jobs data, which increased pressure on Federal Reserve policy makers to resist raising rates. The report saw the ‘Greenback’ fall sharply. As this week began, the Dollar rallied once again before coming under pressure from expectations that upcoming Federal Reserve policy meeting minutes will show that US policy makers are growing increasingly cautious as to when to hike interest rates.

The Indian Rupee meanwhile received some support in the previous session after the Indian central bank decided to leave interest rates unchanged. The reasons for the decision to leave rates unchanged were that the nation’s commercial banks have yet to pass on two previous rate cuts to customers. Uncertainty over food price inflation was another reason as heavy rains looks set to negatively influence upon the Asian nations food supply.

‘Transmission of policy rates to lending rates has not taken place so far. With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the RBI will maintain status quo in its monetary policy stance in this review, said Reserve Bank of India governor Raghuram Rajan.

Against the Pound Sterling, the Indian Rupee was under pressure as the UK currency continued to find support from the release of stronger than forecast Services PMI data. Today, the Pound received more support from a report, which showed that new car sales rose to a record high in March. Dealers reported that they had sold 492,774 new cars in March.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Currency Predictions Daily Curre Forecasts