- Indian Rupee (INR) eases from 2 week high
- First economic contraction in 40 years forecast for this fiscal year
- Safe haven US Dollar (USD) rises as covid-19 cases accelerate
- US Dollar Indian Rupee exchange rate (USD/INR) trades +0.3% at 75.68
After advancing across the first part of the week, the Indian Rupee is edging lower on Wednesday. The Rupee settled on Tuesday +0.3% at 75.50, slightly below from the two-week high of 75.40 reached earlier in the session.
At 09:44 UTC, US Dollar Indian Rupee exchange rate is trading +0.3% at 75.68. This is towards the upper end of the daily traded range of 75.47 – 75.67.
Indian Rating and Research has projected and economic contraction of -5.3% for the current fiscal year, the lowest growth in India’s history. This would mark just the sixth time that India’s economy has contracted. It last happened 40 years ago in 1979-80.
The GDP contraction is expected as a result of the coronavirus lockdown which saw demand evaporate and paralysed the Indian economy.
Despite the historic contraction this fiscal year, India Rating and Research forecast a modest recovery in the coming fiscal year, with growth in the region of 5% – 6% expected.
In terms of a sector breakdown, the agricultural sector was the only bright spot for the economy with a 3.5% increase in gross added value (GAV) forecast. Industry and the service sector are expected to experience GAV contraction -15.8% and -2.2% respectively. The financial sector is expected to continue seeing risk aversion despite a number of policies and measures implemented by the Reserve Bank of India.
The US Dollar is pushing higher versus its peers after a softer start, amid weakening risk sentiment. Concerns over the number of global coronavirus cases is unnerving investors, raising fears that a surge in cases could slow an economic recovery.
According to the World Health Organisation, the number of daily covid-19 cases is accelerating. North and South America are areas of concern. Several US states, such as California, Florida and Arizona are seeing an increasing number of daily cases. 7 states in total reported record coronavirus hospitalisations. Meanwhile, America’s top infectious disease expert has told US lawmakers that the US is seeing a disturbing surge in cases.
This has knocked the mood in the market, overshadowing encouraging US data in the previous session.
