Rupee closes flat at 73.19 as coronavirus scare keeps rate cut optimism in check

The rupee swung wildly before closing flat at 73.19 against the US currency on Wednesday as increasing number of coronavirus cases in India kept investors on edge despite a rate cut by the US Federal Reserve.

The rupee had opened strong and raced to a high of 72.90 to the US dollar in early trade following weakness in the US currency after the rate cut by the US Fed.

Investors, however, turned nervous following an increase in the number of coronavirus cases in India amid emerging fears that the rate cut would not be sufficient to boost markets due to supply constraints and limit the rate of infection. The Indian government on Wednesday said 28 positive cases of coronavirus have been detected so far in India.

The rupee gave up gains as the US dollar, considered as a safe bet in event of a crisis, strengthened, falling to the day's low of 73.64. After swinging 74 paise between the day's high and low, the rupee closed flat at 73.19 to the dollar in line with some recovery in stock markets.

On the stock market front, the BSE Sensex swung over 945 points during the day. The 30-share index settled 214.22 points or 0.55 percent lower at 38,409.48. The broader NSE Nifty closed 52.30 points or 0.46 percent down at 11,251. Foreign investors remained net sellers in capital markets, offloading securities worth Rs 878.38 crore on Wednesday. 

The benchmark 10-year 6.45 government bond yield jumped 11 points to 6.22 amid volatile equity markets. Global crude oil benchmark Brent shot up 1.51 percent to trade at USD 52.38 per barrel amid buzz that oil-producing countries might consider production cut in a bid to cushion the impact of the coronavirus epidemic on prices.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.20 percent to 97.35. "A heavy selling was witnessed in rupee after a positive opening. The weakness crossed the 73.50 marks against the dollar as the USD/INR pair traded above 73.50 for the first time since November 2018.

"The panic of corona plays into our domestic market as well as the global front which has forced the funds outflows," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 72.8733 and for rupee/euro at 81.23. The reference rate for rupee/British pound was fixed at 93.14 and for rupee/100 Japanese yen at 67.62.