The US dollar is higher against the Indian rupee on Thursday morning in a marked rebound after a week of edging lower. The Rupee slid back toward record lows as foreign direct investors withdrew money from India to cover margin requirements in the US stock market, which just fell into a bear market.
USD/INR was up by 43 pips (+0.57%) to 74.11 with a daily range of 73.682 to 74.345 of 5am GMT. The currency pair has been trading flat since the open of trading on Monday following a +0.68% gain last week.
Indian rupee hit by FDI outflows as Dow enters bear market
On Wednesday the Dow Jones entered a bear market, falling more than 20% from its record high, while the benchmark S&P 500 is expected to do so today with futures markets pointing to massive losses on the open of Wall Street on Thursday. The sharp declines in the USA have seen foreign investors move money out of India to satisfy margin requirements.
The Reserve Bank of India has strict rules on how the repatriation of funds to the USA so it cannot all happen at once but will be a gradual process over weeks, which all else being equal, would see a gradual decline the value of the rupee. And while the US does not seemed well prepared for the virus outbreak, the US and the dollar remain a preferred haven destination than India and the rupee.
US dollar gains as haven despite lack of big fiscal stimulus
The demand for a haven was amplified by disappointment in a speech given on Wednesday by US President Donald Trump that failed deliver and major policy announcement. The US has responded to any earlier announcement on Wednesday by the World Health Organisation (WHO) that the coronavirus is officially a pandemic by banning all travel from Europe.
Democrats have poured cold water on Trump plan for a payroll tax cut, calling it “nearly useless” to combat the coronavirus. It appears the acrimonious relationship between the Republican White House and Democratic Congress after the impeachment is making it harder to the US to respond quickly and appropriately to the outbreak with emergency legislation.
