USD/INR is declining on Friday, after gaining over 1% yesterday.
Currently, USD/INR is trading at 73.940, down 0.85% as of 7:55 AM UTC. However, the price is still fluctuating close to a record high, as the rupee has been Asia’s worst-performing asset this month.
The rupee is stronger today because the US stock market experienced a monstrous crash on Thursday, with Dow Jones seeing its worst day since 1987. The market shock is caused by the coronavirus outbreak, which generated panic everywhere.
In response, the US Federal Reserve (Fed) is planning to pump about $1.5 trillion in an effort to prevent “unusual disruptions” in the local and global markets. The central bank would make huge amounts of short-term loans available on Wall Street and buy Treasury securities.
The New York Fed, which leads the Fed’s market operations, stated:
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak.”
The central bank’s move comes after Chairman Jerome Powell consulted with the Federal Open Market Committee (FMOC) members.
Ian Shepherdson, a senior economist at Pantheon Macroeconomics, commented:
“This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up. Now it’s up to Congress to fire the fiscal bazooka, the bigger and quicker the better.”
The Fed’s intervention means that the US dollar will slightly devalue, which is why the American currency has declined against the rupee since yesterday. Nevertheless, the pair is still trading very close to a record high.
The rupee has been the worst-performing Asian currency in March after the Reserve Bank of India (RBI) seized Yes Bank, the country’s fourth-largest private lender. This, along with the coronavirus panic and the economic struggle, is putting enormous pressure on the rupee. The Indian government suspended most visas in an effort to prevent the spread of COVID-19.
Similarly, US President Donald Trump banned all travel from and to Europe, excluding the UK.
The World Health Organization (WHO) officially declared the new coronavirus outbreak a pandemic, as the number of cases surpassed 124,000.
Both the US and India released a series of economic data yesterday, but the pair ignored it considering the huge market shock.
