US Dollar to Indian Rupee (USD/INR) Exchange Rate Climbs for Fourth Week, GBP/INR Up 0.22%
Although the Indian Rupee achieved a high of 60.1712 against the US Dollar yesterday as investors took an anti-US Dollar stance following the Federal Open Market Committee policy statement, the Indian asset is still heading for a fourth consecutive 5-day decline against the ‘Greenback’.
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The US Dollar initially recorded widespread declines after Fed Chairwoman Janet Yellen restated her commitment to keeping interest rates at record lows until beyond the time when the tapering of asset purchases has been concluded.
With the unseasonably harsh winter taking a significant and long lasting toll on US economic output, it is perhaps unsurprising that the Fed is maintaining a cautious stance.
However, recent fundamentals, including the news that the pace of consumer inflation in the US is accelerating fairly rapidly, had led some investors to bet that interest rates could be raised from record lows sooner than expected.
That proved not to be the case however and the US Dollar broadly softened after the only hints forthcoming related to leaving borrowing costs unaltered.
As industry expert Randall Forsyth wittily observed; ‘A Fed Chairman of a generation ago, the late William McChesney Marin, said the job of a central banker is to take away the punch bowl just as the party is getting going. Yell made clear it’s still a long time until ‘Last Call’.
The appeal of the Rupee, meanwhile, has been compromised by the risk-off environment created by the tense situation in Iraq.
The Pound to Rupee exchange rate prepared to end the week 0.22 per cent softer.
In the latest twist to the tale, President Barack Obama has announced that around 300 US troops will be dispatched to aid the Iraqi army in their fight against insurgency. He also intimated that further US action could be taken if the situation makes it necessary.
Concerns that the current tensions could escalate have sent the price of crude oil rocketing (with the commodity achieving its highest barrel price since September on Thursday) and this development could have an adverse impact on India’s trade deficit.
The shortfall is already at its highest in 10 months.
In the view of currency analyst Anindya Banerjee, the Rupee will continue to experience volatility in the near term as the asset ‘remains hostage to the geopolitical tensions in the Middle East.’
The British Pound is currently trading against the Indian Rupee in the region of 102.5800.
The US Dollar is currently trading against the Indian Rupee in the region of 60.2250.