The USD INR rates in the recent times were seen undergoing a consolidation with the rupee against the dollar around the mark of 70.94. All this happened in the backdrop of first budget delivering a 3.3% of fiscal deficit against forecast of 3.4% and 10-year bond yield which has been hovering around 6.70% is at its lowest since October 2017.
These along with some other reasons have been the factors moving the dollar and the pound prices up the ladder against Indian Rupee. Here is a compilation of top three reasons for the same.
The scrapping of Article 370
The overall market seemed to be favoring the Rupee until the government announced repealing of Article 370 and 35A which provided Jammu and Kashmir a special status in the country. This news has acted as a hurdle for the current rally on which the Rupee was and now we see INR becoming weak against the US Dollar and a shift of sentiment seems to be favoring the Dollar.
Economic status of the countries
The global trade tensions have eased, but there is still a risk alongside the current track of global demand. Economic data has been mixed for both the countries, a slower pace of GDP to USA, a still wide trade deficit, and slower - though still positive – PMI (Purchasing Manufacturing Index), support an outlook tinged with caution. The RBI has shown a willingness to ease rates and so we expect another cut in August, an encouraging facet for the outlook of the Indian economy.
India's WPI inflation was at around 2.02 percent in June, compared with around 2.45 percent in May which acted as good signs for INR. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, rose to 52.5 in July against the forecast of 52.2 whereas India's infrastructure output grew at 0.2 percent in June 2019 against the previous of 4.3%. This again brings us at a crossroad where a few cues have boosted the growth of INR while some have haltered it massively.
Britain’s stand on Brexit
GBPINR is falling to lower levels because of Prime Minister Boris Johnson’s tough stance on a no-deal Brexit, which he has said is "now a very real prospect". According to data published by the Office for National Statistics UK inflation held at a one-year low of 2.4%, falling short of expectations that it would jump to 2.6%. The ONS attributed the disappointing result on a sizable fall in prices for clothing and video games, which offset rises in fuel and energy costs.
To sum up the current situation for the currency, we see that INR has seen a choppy movement in the recent times and the current legal, political and economic scenarios, pointing at USD and GBP becoming stronger against the INR in the coming times.
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