The US dollar is higher against the Indian rupee on Friday, making fresh record highs above 74 as investors continue to dump the Rupee, this time encouraged in part by the crisis at Yes Bank, which could be symptomatic of wider banking problems in India.
USD/INR exchange rate was up by 28 pips (+0.40%) to 73.79 with a daily range of 73.507 to 74.07 as of 10.30am GMT.
After a brief respite on Thursday, USD/INR is continuing its upward trajectory on Friday. Weekly gains in the exchange rate stand at +1.70%
The Rupee tanked alongside the Sensex following a big reversal on Wall Street
The VIX index is up amid the spike in volatility and international investors are pulling funds from the Sensex, which dropped over 1400 points on Friday and that is also contributing to weakness in the rupee.
The Sensex fell sharply after the Reserve Bank of India rescued Yes Bank, but the Indian shares had already been falling amid the higher number of coronavirus cases in India. The low number cases in India had been supporting the currency and the stock market but now local traders are joining in with the international fund flows, exiting Indian assets.
The dollar
The Fed’s emergency rate cut has failed in its mission to inspire investor confidence, but it has had a discernible impact on forex and bond markets. The dollar is under pressure from falling Treasury yields as the market prices in further action from the Fed at the official March meeting. Odds now stand at around 70% that the FOMC cuts interest rates by another half-a-percent on March 18.
Falling bond yields in the United States make is less attractive for currency traders to hold onto dollar versus other currencies. There had been a relatively large yield differential between the US and other parts of the world where interest rates are very low, but that is changing.
Today the US reports the month non-farm payrolls (NFP) for February. Expectations are for 175,000 US jobs to have been created, down from the 225,000 in January.
