The US dollar is lower against the Indian rupee on Monday morning with emerging market currencies, led by the Chinese yuan mostly higher against the greenback. At the same time a pullback from last week’s jobs-induced gains saw the dollar mostly lower across FX markets.
USD/INR was lower by 14 pips (-0.20%) to 71.358 with a daily range of 71.27 to 71.49 as of 10am GMT. The currency pair fell from is daily high at 71.49 before stabilising near 71.3. The small losses on Monday leave the exchange rate basically flat over the last six days following a -0.06% contraction last week.
USD/INR: Rupee benefits from more optimistic tone
The rupee is broadly benefitting from the more optimistic tone in markets about the coronavirus outbreak in China, but strength in the dollar means gains have been limited in the USD/INR exchange rate. The coronavirus has also been a double-edged sword for India, which is a big net importer of oil. The prospect of lower fuel demand has seen oil prices tank over 15% in the past three weeks, lowering the price Indians need to pay for transport and heating.
The lack of direction can also be attributed to the Reserve Bank of India (RBI) which opted to keep Indian interest rates on hold last week. The central bank was also less cautious about the growth outlook for India than some might have expected given the outlook for India at other institutions. Lowered global growth estimates from the International Monetary Fund (IMF) for 2020 were almost entirely attributable to a bigger than expected downgrade to its expectation for India.
Dollar lower in other Asian currencies
The yuan gains, which translated to a lower dollar and gains in some other Asian currencies came thanks to the beginning of a new lending program initiated by the People’s Bank of China as well as Chinese inflation coming in higher than expected at 5.4% year-over-year.
Broader market conditions are perhaps slightly less inducive to dollar strength since haven flows resulting from the coronavirus outbreak are slowing. Workers at the Foxconn factory in Zhengzhou returning to work is a positive development for the economic effects of the coronavirus outbreak.