The Indian Rupee is moving edging lower versus the US Dollar on Tuesday, paring gains from the previous session. The Indian Rupee settled on Monday 0.15% stronger at 75.64 amid the partial reopening of the Indian economy.
At 11:45 UTC, USD/INR is trading 0.1% higher at 75.73. This is towards the higher end of the daily traded range of 75.41 – 75.86.
CEA Projects GDP Growth 1% -2%
The Indian Rupee is trading on the back foot as the Indian economy continues to struggle under the impact of the coronavirus crisis.
India’s Chief Economic Advisor (CEA) K V Subramanian said that GDP growth in the first quarter of the fiscal year (April – June) is expected to range between 1% -2% due to the covid-19 crisis, which brought economic activity to a halt. In the second quarter, the economy is expected to pick up as industries restart and supply chains fall back into place.
Subramanian acknowledged that it was difficult to estimate the extent that coronavirus is affecting the labour market given the ongoing uncertainty. He added that the global economic outlook was weak which would almost certainty have negative consequences for the Indian economy as well.
The Chief Economic Advisor’s comments come after data yesterday showed that the Indian manufacturing sector output slumped by the most on record, as both domestic and international demand dried up owing to lockdown restrictions both in India and across the globe.
Over the near term, in addition to the coronavirus situation, US – China tensions will also be monitored closely. Rising geopolitical tensions can often weigh on risk sentiment, making perceived riskier currencies such as emerging market currencies less attractive. President Trump’s efforts to pin the blame for the coronavirus outbreak on China could result in a second chapter of the trade war. An escalation in tensions could see the Indian Rupee slide back towards its all time lows.
US Service Sector PMI Under the Spotlight
US Dollar investors will look towards the release of US ISM non-manufacturing PMI data today. Analysts are expecting a record fall in service sector activity in April, to 32 on the index, down from 52.5 in March. The lockdown measures implemented to protect the public from covid-19 resulted in the evaporation of demand for services, which is expeted to be refleted in the data.
A weak reading could unnerve investors further, boosting demand for the safe haven greenback.
