The US dollar is higher against the Indian rupee on Wednesday in a general flight to safety amid a rising number of coronavirus cases and confusion about the various government and central bank responses.
USD/INR was higher by 22 pips (+0.30%) to 74.28 with a daily range of 74.039 to 74.418 as of 11am GMT.
The currency pair rallied from the outset only to stall out just below record highs. USD/INR exchange rate was little changed at +0.08% on Tuesday and now stands at +0.29% for the week.
Indian Rupee down as worldwide coronavirus cases top 200,000
The Rupee turned lower again on Wednesday as S&P Global Ratings lowered its growth estimates for India to 5.2% for 2020 versus its prior forecast of 5.7%.
The rupee has withstood some big gains in the US dollar that saw some G10 currencies fall to multi-year lows. A renewed market sell-off in global stock markets alongside capital flight out of emerging markets like India is the broader backdrop to the rupee weakness.
The newly announced swap lines from the Reserve Bank of India (RBI) have helped sure up confidence that the central bank will keep liquidity flowing in Indian markets but the currency remains exposed to further weakness as risk sentiment deteriorates.
US dollar gains on stimulus proposals
The dollar has benefitted from proposals from the Trump White House of over $1 trillion in emergency stimulus. Treasury Secretary Steve Mnuchin reportedly told Senators that US unemployment could hit 20% if the measures are not taken.
Part of the package includes $1000 cheques sent straight to Americans. Cash payments to citizens are more favourable for the dollar than quantitative easing (QE) because it doesn’t involve the central bank printing new money. That is unless it is so-called ‘helicopter money’ where the central bank would print the money and send the money straight to Americans, bypassing the Federal Government.
The number of coronavirus cases in the USA is quickly rising but is not deterring forex traders from buying dollars. New York City coronavirus cases have risen by 300 in 24 hours while the Las Vegas strip is shutting for 30 days.
