Rupee woes continue, plunges to 17-month low of 74.17 against US dollar

The Indian rupee slumped by another 30 paise to touch a 17-month low of 74.17 against the US dollar on Monday after global financial market meltdown signalled that the world is staring at a coronavirus-led economic recession.

At the interbank foreign exchange market, the local currency opened at 73.99. During the day, it moved northward, though briefly, to touch a high of 73.85. Succumbing to weakening sentiment, the Indian currency finally settled lower by 30 paise at 74.17 to the American unit.

Meanwhile, crude oil prices were in a free fall, plunging nearly 30 per cent to USD 32.11 per barrel after top exporter Saudi Arabia launched a price war in response to a failure by leading producers to strike a deal to support energy markets. Brent crude futures, the global oil benchmark, was last trading 21.23 per cent down at USD 35.66 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, too slipped 0.80 per cent to 95.18. Forex traders said the rupee depreciated versus major trading currencies as a collapse in oil prices added to risk-off sentiment caused by relentless spread of coronavirus across the globe.

The total number of confirmed coronavirus cases in India has reached 43, according to Health Ministry officials.

More than 3,800 have died and over 110,000 people have been infected globally from the virus, which by Monday reached more than 100 countries and territories.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, as they sold shares worth Rs 6,595.56 crore on Monday, as per provisional data.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 73.6629 and for rupee/euro at 82.6930. The reference rate for rupee/British pound was fixed at 95.4377 and for rupee/100 Japanese yen at 69.56.

The 10-year Indian government bond yield was at 6.07 per cent.

"Rupee fell against the US dollar as investors flocked to buy bonds to hedge the economic shock of the coronavirus," Motilal Oswal Financial Services Forex & Bullion Analyst Gaurang Somaiyaa said adding that rupee is expected to quote with a negative bias and in the range of 73.80 and 74.20.

In their biggest ever single-day drop in absolute terms, the BSE Sensex crashed over 1,941 points and the NSE Nifty tumbled 538 points as no let-up in coronavirus spread and massive crude oil plunge fuelled global recession fears.

Besides, both indices also marked their biggest intra-day fall of all-time.

Benchmarks Sensex and Nifty slumped intra-day 2,467 points and 695 points, respectively.

"The sharp underperformance of INR was a reminder that there are no real safe havens in high-yielding emerging market forex. INR seems to have over-reacted to confirmation of COVID-19 infections while news of the RBI being forced to rescue a big private sector bank did not help," said Rajesh Cheruvu, Chief Investment Officer, Validus Wealth.