Rupee likely to remain under pressure, say analysts

Updated : March 24, 2020 04:59 PM IST

The rising cases of coronavirus in India is expected to keep the rupee under pressure, analysts said.

The lower crude oil prices also failed to provide a relief to the currency.

Strengthening of US dollar against the global currencies amid the outbreak of coronavirus has led Indian rupee to depreciate to its all-time low, above 76 a dollar.

The fears of economic growth concerns due to the pandemic which has led to a shutdown of financial activities across India, eroding a huge wealth from the equity markets and further depreciation in the rupee.

Moreover, the lower crude oil prices also failed to provide relief to the currency.

Amid a global selloff in the equity markets, the equity benchmarks, Sensex and Nifty, witnessed their worst single-day loss in history in absolute terms, on Monday.

Rupee also had tanked more than 1 percent against dollar to below 76 a dollar levels.

On Monday, rupee fell past the 76/$ for the first time ever and settled at 76.16 for the day, within two days of hitting 75 for the first time ever.

The rising cases of coronavirus in India is expected to keep the rupee under pressure, analysts said.

However, globally the risk appetite has got some respite after the US Federal Reserve promised bottomless dollar funding to combat the economic impact of the virus utbreak.

On Monday, the US Fed announced an open-ended asset purchase program.

The central bank said the program will run in the “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”

“While dollar index snapped a 10-day rally. The dollar retreated against developed and emerging currencies alike, in a tentative sign of reduced stress after the steepest appreciation since the global financial crisis. The emerging market currencies and commodity prices have benefited from the Fed's steadying hand,” said Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services.

Meanwhile, the Reserve Bank of India (RBI) also announced unconventional measures to infuse liquidity in the system. A repo rate cut is also anticipated to the extent of 100 bps by the market participants.

“This can limit the depreciation in the rupee but rapid increase in coronavirus cases in India and abroad will keep rupee on the edge. So unless we don’t see the fall in cases, we expect rupee to depreciate,” Gupta added.

He expects USD/INR spot to trade within 75.90 and 76.55. “The higher risk appetite may limit the appreciation in spot, however, growing cases of coronavirus in India will keep the spot afloat,” Gupta said.

Meanwhile, the foreign institutional investors have pulled out a massive Rs 25,938 crore between January 1 and March 18 from the Indian equity markets.

However, the various steps taken by the RBI to curtail the volatility in rupee has been not enough to counter the sell-off in global markets, analysts added.

Published : March 24, 2020 04:59 PM IST

Rupee likely to remain under pressure, say analysts

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