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Indian Rupee Softer Against Pound Sterling and Dollar Exchange Rates

June 18, 2014 - Written by James Fuller

The Pound was weaker against the Indian Rupee and the majority of its most traded peers after the Bank of England’s policy meeting minutes disappointed investor expectations for interest rates to rise before the end of the year.

The UK currency fell as the minutes showed that the BoE’s monetary policy committee voted unanimously to leave interest rates unchanged at the record low level of 0.5%. The minutes also showed that a rate hike depended on inflation and wage growth.

“On the one hand, output growth had been stronger, and unemployment had fallen faster, than had been anticipated by the MPC and most other forecasters. On the other hand, wage growth and inflation had been weaker,” the minutes said.

Against the US Dollar the Indian Rupee tumbled to its lowest level in seven-weeks as concerns rose that the conflict in Iraq will increase oil prices to the detriment of India’s trade balance.

“The government will have to get into fire-fighting mode as oil prices and a weak monsoon are the biggest threat,” U.R. Bhat, managing director of Dalton Capital Advisors Pvt. “We expect the markets to trade weak till the budget next month.”

Demand for the riskier currency waned as Islamist militants launched an assault on Iraq’s largest oil refinery.

“The Rupee is mostly reacting to deteriorating geo-political situation in Iraq. India’s vulnerabilities increases due to oil prices,” said a Mumbai based currency analyst.

Members of the Islamic State in Iraq and the Levant (ISIS) launched their attack last night and according to sources now occupy most of the installation. There was some positive news for the Iraqi forces however as government troops push onto the town of Tal Afar and claim to be hours away from liberating it.

"I ... disagree with those people who think this is nothing to do with us and if they want to have some sort of extreme Islamist regime in the middle of Iraq it won't affect us. It will. The people in that regime as well as trying to take territory are also planning to attack us here at home in the United Kingdom, So the right answer is to be long-term, hard headed, patient and intelligent with interventions that we make ... because these problems will come back and hit us at home if we don't...The estimates are now that this Isis's rise in Iraq and Syria is a greater threat to the UK than the return of jihadists from the Afghanistan or Pakistan region,” said British Prime Minister David Cameron during Prime Ministers Questions earlier in the day.

The Rupee is likely to come under further pressure against the US Dollar later in the session as investor attention turns to tonight’s Federal Reserve policy meeting statement. Economists will be looking for further signs that the US Central Bank may be considering raising interest rates.

“If the Fed turns a little bit more hawkish today, that will help the dollar, we are not sure if this is the time for an uptrend in the dollar yet. Probably we think more likely toward the end of the third quarter as stimulus nears the end,” said Alvin Tan, a foreign-exchange strategist at Societe Generale SA in London.

The Pound could recover some ground on Thursday if the latest UK retail sales data come in strongly.

Latest Rupee and Pound Sterling exchage rates today (20/06/2014)

The Pound Sterling to Australian Dollar exchange rate is trading up +0.15% at 1.81578 GBP/AUD.
The Pound Sterling to Canadian Dollar exchange rate is trading up +0.19% at 1.84666 GBP/CAD.
The Pound Sterling to Euro exchange rate is trading up +0.12% at 1.25344 GBP/EUR.
The Pound Sterling to US Dollar exchange rate is trading up +0.12% at 1.70588 GBP/USD.
The US Dollar to Indian Rupee exchange rate is trading value +0% at 61.20500 USD/INR.
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