MUMBAI: Cracks are starting to appear in the rupee’s defences with new coronavirus cases being reported in India.
The rupee slid as much as 0.4% to 73.6 per dollar on Wednesday to become the worst performing Asian currency.
India has so far reported 28 positive cases, which includes 17 Italian tourists. The currency had stayed relatively stable earlier in the absence of new virus cases in the country.
A broad dollar weakness triggered by an unexpected rate cut from the US Federal Reserve on Tuesday did little to support the rupee, even as most other emerging Asian currencies rallied on the back of that move.
The rupee may fall to as low as 75 per dollar, surpassing the record low hit in October 2018, according to ING Bank NV. India’s currency already fell to its lowest level in more than a year on Wednesday.
“I don’t see much respite from the selling pressure in the near-term,” said Prakash Sakpal, an economist at ING Groep NV in Singapore.
“As things are going elsewhere in the world, we can’t rule out the risk of rapid spread of the disease in India.”
The dollar-rupee pair has moved to a higher trading range of 72-75, he said.
The outflow of foreign funds from the nation’s debt has also weighed on the rupee. Overseas investors dumped sovereign bonds in ten out of the past 12 days, pulling a net 127.5 billion rupees, according to Bloomberg data.
The Reserve Bank of India Governor Shaktikanta Das in an interview to Bloomberg News hours before the Federal Reserve’s emergency rate cut said there was room to reduce borrowing costs if needed amid rising threat from the outbreak.