GBP/INR is returning to Monday levels after it touched the weekly low at 91.550. The pair started to rally yesterday and is now trading at 92.519, up 0.50% as of 6:25 AM UTC.
The rupee is suffering along with the national currencies of all trade-reliant economies as US President Donald Trump signed a bill that supports pro-democracy protesters in Hong Kong. The move angered China, which might negatively affect the trade negotiations.
Trump said that he didn’t want to impact the trade talks, admitting that he didn’t agree with some parts of the bill voted last week by the US Congress. However, China responded by summoning US Ambassador Terry Branstad, with Vice Foreign Minister Le Yucheng asking him to stop interfering in Hong Kong affairs.
Nevertheless, some economists hope that the situation won’t touch the trade talks between the world’s two largest economies.
David Zweig, professor at the Hong Kong University of Science and Technology, said that while China is enraged by the fact that the bill will push Hong Kong protesters to become more violent, the situation will probably won’t affect trade negotiations so much. Zweig, who is also director of Transnational China Consulting, commented:
“This is not a fundamental challenge to U.S.-China trade negotiations. It’s another notch in US-China hostility; it’s Congress being more assertive than usual, but I think it will be a short-term response, not even a medium-term response. Xi wants a deal, I think.”
On Tuesday, Trump said that the two countries were in the “final throes” of a phase one trade deal that would see tariff rollbacks on goods worth about $500 billion. The President likely wants to handle the agreement as soon as possible to ease the economic pressure ahead of his re-election campaign next year. On the other side, China is also looking to prevent further deterioration of an economy that now struggles with the worst slowdown in decades.
The rupee is also under pressure ahead of gross domestic product (GDP) data release. Two local TV channels reported that the country’s quarterly growth is likely to be around 4%, citing government sources. This is way lower than most rating agencies predict.