Dubai: Indian rupee fell for the third consecutive session on Tuesday against the dollar to 73.23.
The rupee has weakened about 2.5 per cent to hit a 15-month low ever since the outbreak of the coronavirus (COVID-19). While the virus has been spreading fast and claiming more lives, the economic impact has gripped global markets.
In the UAE, the rupee fell to Dh19.97 a dirham on Tuesday and later stabilised o 19.92 according to data from XE.com.
Despite the high volatility, some exchange housed were offering up to 19.90 for a dirham on Tuesday afternoon.
The sudden slump in the rupee around the payday in the UAE has come as a boon for expatriates who send money regularly home.
As investor sentiment remains fragile amid concerns over the impact of coronavirus, the rupee is expected to remain under pressure.
“Indian Rupee has depreciated by around 2.5 per cent since last Thursday’s low levels of 71.55. In today’s session, the currency finally broke above 73 marks with sharp losses seen towards the later part of the trading session,” said Vijay Valecha, Chief Investment Officer, Century Financial.
At the interbank foreign exchange market, the local currency opened at 72.50. During the day it saw a high of 72.43 and a low of 73.34 against the greenback.
The rupee finally settled at 73.23 against the dollar, down 47 paise over its previous closing price, The currency had settled at 72.76 against the greenback on Monday.
"The sharp decline came when two new coronavirus infections were identified in India. One of the primary reasons for the downfall is the rise in a number of coronavirus cases in India. Indian government yesterday reported 2 more new cases of coronavirus increasing fears among at the local market participants,” said Valecha.
In addition to the virus scare, faltering economic fundamentals too are working against the rupee.
The medium-term outlook for the Indian currency has been under pressure due to the slowing economy and the twin deficits.
Earlier this month rating agency Moody’s reduced its 2020 growth forecast for India to 5.4 per cent from 6.6 per cent predicted earlier, suggesting slower recovery. The agency cited domestic factors but also mentioned the impact of the coronavirus outbreak. In the fiscal year 2021, the Indian economy is expected to grow by 5.8 per cent versus 6.7 per cent predicted earlier. Moody’s said that India’s economy had slowed dramatically in the last two years.
The OECD has cut India’s growth projection by a steep 1.1 percentage point to 5.1 per 2021
While the outlook appears grim, the offshore non-deliverable forwards are already predicting a fall further beyond 73 to a dollar by the end of March.
Source: Gulf News