Coronavirus fear: Rupee breaches 75 a dollar, hits intra-day low of 75.30

A thinly traded market is compounding the problem for the rupee

The Indian rupee crossed 75 a dollar on Thursday, responding to the risk-off sentiment in which all currencies witnessed a rout against the greenback, with oil prices crashing amid the deepening coronavirus pandemic. 

The rupee, which hit an intra-day low of 75.30, closed at 74.99 a dollar, according to Bloomberg, falling 1.01 per cent. However, the Clearing Corporation of India said the rupee ended the day at 75.12 a dollar.

A thinly traded market is compounding problems for the rupee, as any minor lumped-up demand for the dollar or slight dollar sales by the RBI are changing the course of the exchange rate.

“We are in uncharted territory now. All currencies are falling; the rupee is falling too. But the rupee has performed much better than other currencies,” said Satyajit Kanjilal, managing director at Forexserve.

The rupee might continue to depreciate in the coming days, sources said, adding that though the RBI had enough reserves to arrest a slide, it would unlikely want to use them in a hurry. 

The dollar index, which measures the greenback’s strength against major global currencies, crossed 102, the highest since January 2013, on risk-off sentiment as investors rushed to liquidate their investments globally in search of safe haven assets such as US Treasury. 

The pound fell to its lowest level since 1985. The Australian dollar also hit a multi-decade low even as crude prices fell to $22 a barrel. 

The rupee’s fall was sharp, but not as much as other currencies in the region. The Indonesian rupiyah fell the highest in the region, tumbling 4.34 per cent in a day, while the South Korean won fell 3.12 per cent. 

“Risk-off sentiment is pushing up the dollar index. Emerging markets currencies, including the rupee, will remain under pressure for some more time,” said Gopal Tripathy, head of treasury at Jana Small Finance Bank. 

“Even as the RBI has enough reserves, it is unlikely that the rupee will strengthen significantly from the current level, if it must have to strengthen,” Tripathy said. 

Currency dealers say the RBI did intervene to limit the rupee’s fall, including in the futures segment. 

According to IFA Global, a currency consultancy, importers must hedge their provision as the rupee crossed its record lows. 

“The markets are now dealing with a situation that is not easy to quantify or discount. The easiest choice is to ride out the storm by seeking out safe havens,” said Hitesh Jain, lead analyst at YES Securities.

According to Jain, volatility will persist, even as the falling current account deficit due to low oil prices and stronger balance of payments is a positive. 

The rupee can reach even 76 a dollar in the next one to two months, YES Securities expected.

Meanwhile, India’s bond yields also climbed up as foreign investors sold their holdings in local bonds. The 10-year bond yield closed at 6.41 per cent, up from its previous close of 6.29 per cent even as the RBI announced secondary market bond purchases of Rs 10,000 crore on Wednesday to soften the yields.