The US dollar is flat against the Indian rupee on Monday, with the exchange rate caught in the middle of 30% one-day crash in the price of oil and a massive deterioration in investor sentiment. India, as a net oil importer benefits from a lower oil price but as a developing nation its currency is perceived as risky.
USD/INR was down by 41 pips (-0.05%) to 73.99 with a daily range of 73.93 to 74.03 of 4am GMT. The currency pair has been trading flat since the open of trading on Monday following a +0.68% gain last week.
The Indian rupee is holding its own in what is already a very ugly looking day in financial markets, even before US and European markets have opened. That is thanks to a record-breaking one-day crash in the price of oil. Oil prices have plummeted 30% following the decision last week for OPEC and its allies not to introduce production cuts.
Other free floating Asian currencies including the Korean won are coming in for heavy selling in FX markets, losing in excess of 1%. India will benefit from paying less for its oil imports, however oil price stability is a requirement for financial stability and India, like other developing nations will tend to see its financial markets suffer more in a financial crisis.
The USD down further to slow response to coronavirus outbreak
The dollar had been losing some ground last week after what many economists have called a panic reaction from the Federal Reserve to cut interest rates by half-a-percent, two weeks before the scheduled monetary policy meeting. A better-than expected February US non-farm payrolls report on Friday had only a fleeting impact on the dollar since the data was perceived as out-of-date and not including any impact on hiring from the coronavirus.
Added to the glum mood towards the USA is what is being perceived as a slow response to the coronavirus outbreak. Reports of a State of emergency in New York and California coupled with not enough testing kits for the virus is causing concern that there could be a wider uncontrolled outbreak.
