Rupee hit record low of 74.50 a dollar amidst COVID-19 woes
13 March 2020
The Indian rupee hit a record low of 74.50 against the US dollar today, breaching previous low of 74.48, hit in October 2018. The rupee, which has been sliding against the US for a long time, now faces the pressure of dollar buying following the spread of coronavirus and a consequent slump in global trade.
The fast spreading coronavirus is hammering stock and commodity as well as financial markets globally amidst a global dollar liquidity mismatch and extreme risk aversion following the spread of coronavirus infections.
The Reserve Bank of India on Thursday announced a dollar/rupee swap window to arrest rupee fall after the Indian currency closed at 74.21 a dollar in the previous session.
RBI said it will conduct sell/buy swaps in the foreign exchange market to ensure adequate dollar liquidity amid the current global rout in markets, with the first such swap for $2 billion to be held on 16 March.
However, the rupee later recovered to 74 against the US dollar later in the day, having traded in the range of 73.90 to 74.50 so far in the day.
Meanwhile, trading on BSE and NSE resumed after a temporary halt, triggered by circuit breaker limit, after Nifty slumped 10 per cent in early trade.
Foreigners have pulled $2.2 billion from Indian equities this month, the most since August. They also unloaded Rs7,090 crore ($956 million) of sovereign debt on Wednesday.
The Reserve Bank of India, which wants the rupee to remain stable, said it would continue using long-term repurchase operations and other liquidity tools to prop up the rupee.
The Narendra Modi government is mulling higher spending to shield India from the coronavirus outbreak, according to people with knowledge of the matter.
Analysts estimate the virus to shave off about 30 basis points from India's growth target, which was pegged at 6-6.5 per cent in the year starting 1 April 2020.
The government is also considering cutting retail pump prices of gasoline and diesel to match the fall in crude oil prices instead of raising duties to bolster revenues, they said.