Rupee Breaches 75 Mark Against Dollar For First Time Ever: 10 Things To Know

Edited by Sandeep Singh (with inputs from agencies)

19 Mar 2020, 06:57 PM IST

INR vs USD Rate Today: The rupee is down 5.24% against the dollar so far this year

Sharp losses in the domestic equity markets put pressure on the rupee, say analysts. Equity market benchmarks S&P BSE Sensex and NSE Nifty 50 ended 2.01 per cent and 2.42 per cent lower respectively, extending losses to a fourth straight trading session amid a turmoil in the global markets.
Benchmark 10-year government bond yield climbed to as high as 6.45 per cent during the day and was last seen at 6.41 per cent, as against the previous close of 6.30 per cent.
Crude oil prices bounced back nearly 20 per cent after days of heavy losses, but the gains were short-lived. Brent crude futures - the global benchmark for crude oil - were last seen trading up $2.10 - or 8 per cent - at $26.98 per barrel. The dollar index - which gauges the greenback's strength six peers overseas - was last up 0.22 per cent.
Analysts say the rupee is likely to remain under pressure in the near term as the ongoing selloff in global markets continues, in the backdrop of the coronavirus pandemic looming over world business.
"The RBI has once again stepped in with interventions targeted at ensuring the smooth functioning of financial markets... However, due to sustenance of heavy outflows from Indian equity and debt market, it may find it increasingly difficult to support the rupee," said forex advisory firm CR Forex.
The central bank on Wednesday announced open-market buy purchases worth Rs 10,000-crore on March 20 in a bid to ensure liquidity and stability across market segments. Open market operations are intended to help cool government bond yields and lead to better spreads for corporates.
Spreads between government bonds and corporate bonds have risen in past few days because of the extreme risk aversion that has led investors to dump all assets including Indian bonds, leading to low trading volumes in corporate bonds and commercial papers, and prompting the central bank to intervene.
Financial markets the world over are bearing the brunt of the coronavirus outbreak as it threatens world business, fuelling fears of recession in major economies. Investors fear the current selloff in the capital markets is yet to bottom out as aggressive steps by policymakers around the globe fail to lift market sentiment, say analysts. Almost 2,19,000 coronavirus cases have been reported globally, and 169 in India.
On Wednesday, the European Central Bank committed $820 billion in bonds through 2020, following emergency interest rate cuts and fiscal support packages around the globe. But so far none of it has been able to put a floor under dire sentiment, and some $15 trillion in shareholder value has been wiped out in little more than a month of heavy selling.
"The panic in Asian currencies spilled over to the rupee, dragged by weaker yuan coupled with broad dollar strength. The reaction function of the central bank would be interesting to watch," said Abhishek Goenka, founder and CEO of forex advisory firm IFA Global. "Lack of Intervention and continuous scout for dollars will further weaken the rupee to fresh lows," Mr Goenka added.