Indian rupee
Indian rupee continues to fall, now touching its lowest in 15 months after fresh coronavirus cases in country, and the pressure is set to continue this week. Image Credit: Pixabay

Dubai: Indian rupee continues to fall, now touching its lowest in 15 months after fresh coronavirus cases in country, and the pressure is set to continue this week.

The Indian rupee weakened for the third straight session on Monday after two fresh cases of the coronavirus were detected in the country.

The rupee closed the day 0.5 per cent lower at 72.7650 a dollar, its weakest level since Nov. 13, 2018, while amassing a 1.6 per cent decline over the last three trading sessions. The rupee to dirham rate is Rs 19.74 per dirham.

Analysts cautioned that the rupee could weaken further during the week as the virus is seen spreading at an alarming rate worldwide, but there was a glimmer of hope as central banks around the world were intervening with interest rate cuts.

“The hope that central banks across the globe may come up with stimulus measures to revive global growth held markets higher,” said Vinod Nair, head of research at India-based Geojit Financial Services. “However, domestic manufacturing growth for February indicated weakness due to supply concerns indicating that short term concerns could keep market volatile.”

Two new cases

The sharp fall in rupee was driven largely by the virus-driven sell-off on Indian stock market, with the broader Nifty share index falling as much as 1.5 per cent before closing the session down 0.62 per cent. Earlier in the session, the market rallied as much as 2.1 per cent on hopes that major central banks would take steps to stabilise financial markets amid the virus epidemic.

With the two new cases – one being detected in the capital city New Delhi and the other in the southern state of Telangana – the total number of people who have tested positive in the country is now five, according to a government issued statement.

The epidemic, which originated in the Chinese province of Hubei, has killed 3,000 people worldwide as authorities race to contain infections in Japan, Iran, Italy, South Korea and the United States.

The China-centric virus has so far hit India’s manufacturing and exports sectors and the government said it was taking all needed steps to protect Indian industry from the threat, especially in the area of intermediate goods where $30 billion worth of bilateral trade happens every year.

Faring better than rivals

The currency has fared better than other currencies in wake of the virus, with the rupee losing just 1.4 per cent in February, compared to a 5 per cent loss each of Russian rouble and Brazilian real during the period, when the concerns over the virus spread across the globe. But the pressure is set to continue.

The medium term outlook for the Indian currency has been under pressure due to the slowing economy and the twin deficits. Last 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.

Moody’s outlook is way below that of competitor S&P, which expects 6 per cent growth in 2020 and 7 per cent in 2021.