The US dollar is lower against the Indian rupee on Thursday in a pullback from the record high reached on Wednesday after California declared a state of emergency following its first death from the coronavirus.
USD/INR was down by 38 pips (-0.52%) to 73.14 with a daily range of 73.045 to 73.565 as of 10am GMT.
The losses for USD/INR on Thursday come off the back of a +0.67% gain on Wednesday that saw it notch up a record high. The currency pair is still up +0.85% on the week.
INR – The worst performing Asian currency this week
While other Asian currencies rebounded thanks to the emergency rate cut from the Federal Reserve, the rupee slumped to record lows. Bank analysts are now beginning to forecast the rupee could fall to as low as 75.00 to the US dollar.
Six people have now tested positive for the coronavirus in India and there are concerns that the lack of basic healthcare services for many people in the highly populated country could mean an explosion in the number of cases were the spread to take hold. Foreign investors are drawing funds out of equity and especially bond funds in India. The falling yields on Indian debt are no longer compensating international investors against the currency and economic risks facing India due to its already entrenched slowdown and the new threat from the coronavirus. Analysts at HSBC now expect a 40 basis point move from the Reserve Bank of India (RPI) at its April meeting.
The dollar
Prospects for the Indian currency could worsen if OPEC acts today to limit the fall in oil prices. A big output cut from OPEC should sure up the price of oil, a bad thing for India as a net exporter.
The dollar is showing signs of broader weakness now that the coronavirus is beginning to spread in the United States and following the Federal Reserve emergency rate cut. Congress has approved $8bn in funding to the fight coronavirus as California has called a state of emergency.
