The Indian rupee opened higher at 20.70 per UAE dirham on Tuesday, compared to the previous close, then went on to touch a new low of 20.89 against the previous close of 20.71 per dirham as shares closed three percent higher.
Currency analysts said the Indian currency remained under mounting pressure amid huge outflows from the capital market. The rupee is likely to test 76.50 per dollar any time now in such a risk-averse situation when investors are unloading equities, bonds and currency.
Oliver Allen, analysts at Capital Economics, said while most currencies will eventually regain much of the ground that they have recently lost to the dollar, that process cannot be expected to start until the pandemic has clearly passed its worst. "On the one hand, this given the greenback a safe-haven boost, which is typical in times of crisis. On the other hand, it has led to strains in money markets, as banks and companies outside the US have scrambled to obtain US dollars."
Analysts said the fall in the rupee comes even as the RBI has been heavily intervening in the spot market. The RBI provided $2 billion of dollar liquidity via a forex swap lasts Monday and is expected to provide a similar line today.
The Indian stock market pick-up came in the wake finance minister's announcement of an economic stimulus package to help battle the impact of the rapidly spreading coronavirus.
The minister said the government is closely monitoring volatility in stock markets as she announced a slew of measures for the economy. "The regulators, Reserve Bank and the finance ministry are all working together to keep monitoring the developments and volatility in the stock market. SEBI (Securities and Exchange Board of India) has come up with some set of guidelines and also stated its position," Nirmala Sitharaman said, during a press conference.
The sentiment was also boosted by the US Federal Reserve's move to roll out an unprecedented array of measures on Monday to help the world's largest economy fight the pandemic.
The NSE Nifty 50 index closed 2.51 percent higher at 7,801.05, while the S&P BSE Sensex settled 2.67 percent higher at 26,674.34.
Sitharaman did not give details on when the country would announce the package, but said there was "no intention of delaying such announcements."
Indian stocks have tumbled more than 30 percent so far in March, with major indexes suffering their worst single-day fall in history on Monday.
The rapidly spreading virus has forced the government to push several states into lockdowns, bringing normal life to a grinding halt. India has so far registered over 471 cases of coronavirus and reported nine deaths.
In Mumbai, Infosys Ltd was the top gainer, closing up 12 percent. The Nifty IT index finished the session over six percent higher.
Copyright © 2021 Khaleej Times. All Rights Reserved.