How Will Brexit Impact the Euro to INR Value?

The Euro, one of the world's most traded currencies, has experienced significant depreciation since its inception, and it continues to devalue against several other major currencies, including the Pound and the Yen. According to recent data, one Euro is currently worth approximately 83.3 English Pennies, a stark decline compared to its value when first introduced.

Expert Predictions and Market Trends

Speculator sentiment suggests that the devaluation of the Euro may worsen ahead of no-deal Brexit negotiations, as it is expected that market participants will focus on selling the British Pound on the likely no-deal Brexit day. However, predicting the exact impact on the Euro to INR exchange rate remains challenging. In the short term, such fluctuations are influenced by a variety of economic and political factors, and any significant change would be difficult to forecast.

In the long term, the value of the Euro against the Indian Rupee (INR) will depend on the economic strength of both currency blocs and the structural challenges within them. The Eurozone operates under a free trade zone but does not use a single currency, which provides the UK with a unique economic positioning.

Understanding the Exchange Rate Dynamics

The Euro to INR exchange rate is not directly quoted, as one must use the US Dollar as an intermediary currency. This sets a dual exchange rate, influenced by the USD to Euro and USD to INR exchange rates. Various factors contribute to the value of a currency:

SDR Basket Inclusion: The Euro and US Dollar are included in the Special Drawing Rights (SDR) basket, whereas the INR is not. This inclusion can affect the value of the currency in global trade. Soft vs. Hard Currency Status: The INR is typically categorized as a soft currency, not fully convertible and facing challenges with trade and capital account deficits. Trade and Capital Account Deficits: The current capital and trade account deficits in India contribute to a negative exchange rate outlook.

Currently, the INR has the potential to appreciate, but the competitive advantage of the country's exports and employment levels might suffer if the exchange rate moves too favorable in its favor. Additionally, foreign direct investment (FDI) flows into India and Vietnam, both of which are currently the largest recipients of FDI in Asia, have been impacted by corruption issues in both countries.

Expert Recommendations

Given the uncertainty surrounding the impact of Brexit on the Euro to INR exchange rate, experts advise saving in hard currencies and precious metals like gold and silver up to 50%. With Brexit expenses already in Euros, it is sensible to switch to other hard currencies and maintain reserves in gold and silver to hedge against potential economic instability.

As the situation evolves, the global financial community will be closely monitoring the outcomes of Brexit negotiations and their implications for the Euro and other currency values. Increased cross-border trade agreements, Together with geopolitical shifts, will play a critical role in shaping these dynamics in the coming years.