British Pound hits all time high versus rupee in the local market

The cable saw unprecedented rise in its value versus rupee in the open market dealings amid pound’s better performance in the international market. The wave of rise in price of pound sterling has continued from January 2007 and getting help from falls in price of dollars in the international market.

The upward trend in the graph-1 clearly shows the upbeat performance of the cable against rupee in the open market dealings in four months. Last four weeks research conducted by KKI Research Department portrays the picture following picture of gains posted by the cable:

24th Mar 2007:
The cable kept making gains versus national currency in the kerb dealings this week. Pound Sterling set off new week’s trading at Rs. 117/80, continued to gain and changed hands Rs.118/70 at close of trading sessions on Saturday. Thus, rupee shed 0/90 paisas versus British pound in the kerb market.

31st Mar 2007:
Pound Sterling continued to go up versus rupee in the kerb market. The cable kicked off new week’s trading at Rs.118/65, continued to show robust performance and altered its position at Rs.118/90 at close of markets on Saturday. Thus, rupee shed 0/25 paisas versus British pound in the local market.

7th April 2007:
The cable showed both trends the upward and downward versus local currency. However, the British Pound ended week by posting a net loss of 0/40 paisas. Pound Sterling started off trading at Rs.119/30 on Monday and was trading at Rs.118/90 at close of markets on Saturday. In the international market main headline was that the Bank of England kept interest rates unchanged for the third consecutive month at 5.25%, a decision which widely expected.

14th April 2007:
The cable continued to hit blows versus rupee in the kerb. Pound Sterling kicked off trading at Rs.118/60 on Monday and was trading at Rs.120/15 at close of markets on Saturday. Thus, rupee gave up Rs.1/55 paisas versus British Pound.

International Scenario
Pound Sterling has risen to its highest level against the US dollar since 1981, breaking through the $2.010 mark. The currency rose above $2 on Tuesday, 17th April 2007 after unexpectedly high UK inflation figures indicated further interest rate rises were likely. The Bank of England is widely expected to raise rates to 5.5% on 10 May 2007 and at least once more later in the year.

Bank of England’s meeting minutes:
BoE voted 7-2 in favor of keeping the benchmark rate unchanged at 5.25, while the other two voted for an immediate rate hike. Regarding inflation the committee split in three groups, the first one considered inflation will be back soon, the second one considered there's a need for more time to study the market until May in order to take a decision for a rate cut or hike, while the third one saw a need for an immediate rate hike. In conclusion, markets expect a rate hike in May when a report regarding growth and inflation will be released as well, especially after the release of the CPI indicating a rise in inflation which exceeded expectations, although BoE's Governor mentioned that inflation will ease in the upcoming months.

Inflation issue:
The pound was strengthened further by the release of the minutes of the Bank of England's last interest rate meeting at which two of nine members voted for an immediate rate rise.

Official figures also showed that average earnings rose at an annual rate of 4.6% over the three months to February, which is the fastest rate for almost three years.

The Bank of England is concerned that the current rate of inflation will encourage workers to press for higher wage settlements, which would create more inflation.

The Office for National Statistics pointed out that the rise in average earnings came entirely from bonuses, but those can still be inflationary.

Sources: www.forexpk.com, KKI Research Dept’s reports, www.bbc.com, www.crownforex.com