US Dollar to Indian Rupee Exchange Rate Climbs, US Services Sector Improves

The US Dollar to Indian Rupee currency pair advanced by 0.2% during the North American session as the US published positive domestic data. The USD/INR exchange rate achieved a high of 61.8900 during local trading as the Rupee snapped two days of gains in spite of India’s services PMI showing improvement. The nation’s services index increased from 51.1 in December to 52.4 in January. Economists had expected a decline to 49.83. Industry expert Pranjul Bhandari said of the result; ‘The January Services PMI was marked by faster expansions in activity and new orders. The weakest sectoral performance in this otherwise encouraging data was from financial services. Business sentiment led by anticipated improvements in demand and new commercial initiatives, rose to a seven-month high. On the inflation front, both input and output prices rose further, though at a modest pace when compared to historical trends. We expect RBI to cut rates by a total of 75bp in 2015, but no further as latent inflation pressures could pick up when growth sees a meaningful lift.’

However, fluctuating oil prices and demand for US Dollars among banks and importers saw the Rupee falter. The US Dollar was also boosted by the afternoon’s US reports. The final Markit Services PMI advanced from 54.0 to 54.2 and the ISM Non-Manufacturing Composite PMI printed at 56.7 in January, up from a positively revised reading of 56.5. While the headline figures are encouraging, in a statement issued with the Markit report economist Chris Williamson noted; ‘Markit’s US PMI surveys accurately anticipated the near-halving in the pace of economic growth in the fourth quarter of 2014, and suggest that the rate of expansion remained little better than 2.0% annualised at the start of 2015. Companies are clearly struggling at the moment, with the surveys recording the smallest increase in new orders seen since the financial crisis six years ago amid weaker US and global economic growth and the strong US Dollar.’

Separate US data showed that MBA Mortgage Applications increased by 1.3% in the week ending January 30th and that the ADP Employment Change report recorded jobs growth of 213,000. On Thursday the US Dollar to Indian Rupee exchange rate could fluctuate as a result of the US Initial Jobless/Continuing Claims, trade balance and consumer outlook figures. Further movement in commodity prices will also be of interest.