Indian Rupee Falls as Inflation Jumps Faster than Expected

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Indian Rupee Falls as Inflation Jumps Faster than ExpectedThe India’s rupee plunged by the steepest margin in a week as inflation grew faster than expected, while factory production lagged expectations.

The rupee retreated 0.2 percent to trade at 61.2250 per dollar, the biggest decline since August 6. Indian consumer prices grew 7.96 percent in the year through July, the strongest gain in two months. Another report showed that factory output grew 3.4 percent in June, much slower than the 5.6 percent increase expected by economists in a Bloomberg News survey.

“The jump in inflation is disappointing,” Devika Mehndiratta, a Singapore-based economist at ANZ, said in a note. “Though industrial production growth disappointed, a deteriorating inflation outlook will effectively tie the hands of the RBI.”

Since taking over in September 2013, Reserve Bank of India Governor Raghuram Rajan has made keeping inflation stable and low his priority in order to boost confidence in the rupee. Rajan retained the central bank’s target repurchase rate at 8 percent on August 5 and warned monsoon rains may push inflation up.

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Meanwhile, the ruble plunged for the second straight day on fears that a Russian aid convoy headed to Ukraine may raise tensions. The currency tumbled 0.2 percent to trade at 36.2600 per dollar at 4:03 p.m. in Moscow. It also declined 0.1 percent to steady at 48.4505 per euro and tumbled by the same margin against the central bank’s benchmark pool of euros and dollars to 41.7498.

Russia flagged a 280-truck humanitarian assistance convoy carrying 2,000 metric tons of donated medicine, food and water headed to Ukraine under the backing of the International Committee of the Red Cross. However, Ukrainian officials announced today that they won’t allow the convoy to enter their country, saying they would send their own aid instead. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com