Indian Rupee in fresh slump: GBP to INR Slips 2.5 pct Alongside Other Emerging Market Currencies

The Indian Rupee (Currency:INR) is feeling a significant degree of heat on Tuesday afternoon in London:

• The Pound Sterling to Indian Rupee exchange rate is 2.5 pct higher on a day-to-day basis on Tuesday, 1 GBP = 102.6256 INR.
• The Indian Rupee to Pound Sterling is thus at 0.0097.

For the latest retail market rates please see here. Please note that the above are spot market quotes, your bank will affix their own discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here.

Geo-political tensions, tapering fears pressure Rupee and emerging market assets lower

Ipek Ozkardeskaya at Swissquote tells us there are a number of issues pressuring the Rupee and emerging economy counterparts at present:

"The emerging market currencies took another dive overnight. The Indian Rupee was among the biggest losers, hitting a fresh historical low of 65.65 against the US dollar, Indonesian Rupiah slumped 4.15%. Turkish lira slipped above 2.00-psychological resistance against USD and traded to 2.6878 against euro (historical lows on both crosses).

"The Asian equities heavily sold off: Jakarta Composite dropped 3.55%, Philippine’s SE IDX lost 4.25%. MSCI Emerging markets started the week 1.09% down on the geopolitical concerns in Syria. The US and Russia postponed Syrian peace talks on claims that Syrian government might have used chemical weapons against civilians. CNN reported that US could attack Syria within hours.

"The main topic in Jackson Hole meeting has inevitably been the normalisation of highly expansionist policy actions for the world’s leading central banks (undoubtedly lead by Fed).

"As talks on Fed’s QE exit to begin as soon as September intensifies, the IMF Chair Christine Lagarde called the central banks to not “rush to the exit”.

"If Madam Lagarde’s fears on heavy capital outflows from the emerging markets are real, the market’s conviction on QE effects in developed economies is much less. The expectations on Fed reducing the monthly USD 85bn worth bond purchases are likely to gather pace through September 17-18th FOMC meeting."

Camilla Sutton at Scotiabank says investors are now dumping the likes of the Indian Rupee in favour of the more liquid and larger currencies:

"Emerging market FX is reacting to fears of shifting US monetary policy, pressuring the currencies of the most vulnerable countries (those with large current account deficits, insufficient FX reserves, deteriorating growth outlooks or without firm central bank frameworks) with large capital outflows.

"In order to slow these outflows some central banks have reacted through policy intervention – with varying and often limited success. As the capital flees the EM it has sought out the liquidity provided by the G4 currencies of USD, EUR, JPY and GBP and helped to support these."