The US dollar is flat against the Indian rupee on Tuesday, taking a rest from a very volatile day in global financial markets. The rupee hit a 17-month low on Monday as capital flight continues to strike at the heart of Indian markets.
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 was tracking back from above the 74.00 handle reached on Monday but only just.
On Monday, USD/INR gained +0.26% on top of the 2.02% gain made last week.
Indian shares sold as concerns about the coronavirus outbreak rise
The coronavirus is front and centre in every investment decision in today’s markets and it has been determined that India is not well placed to keep investor capital safe. Data for the activity of foreign institutional investors (FIIs) shows they sold Indian shares worth Rs 6,595.
The most obvious negative impact on India is via the slowdown in global economic activity. India had just been emerging from an economic slowdown and is now strongly at risk of turning down again.
The high yield of the Indian rupee had been keeping a floor under the exchange rate but the speed of the decline in US Treasury yields has symbolised the desire for safety over yield. US debt is earning investors relatively much less versus Indian government bonds but is in demand as a haven.
US government feared to have been slow to respond to the virus outbreak
President Trump will hold a press conference on Tuesday to discuss the US government’s coronavirus response. The prospect of another package of spending measures in shares on Wall Street that look set for a stronger open after Monday’s 7% decline. Trump has teased that he is talking to Congress about a possible cut to payroll tax is.
Still there is a concern that the US has been slow to respond. The Centre for Disease Control (CDC) is warning people over 60 or with illness should stock up with food supplies and stay at home. There are now 500 reported cases in the United Sates, and if not contained it could rapidly face a similar situation to Italy. Italian Prime Minister Conte has now put all of Italy on lockdown.
