Rupee slips 60 paise to close at 72.21/$

The rupee on Friday fell

60 paise to close at Rs

72.21 against the US dollar tracking a sell-off in the equity market, as overseas investors dumped Indian stocks on fears that coronavirus outbreak may trigger recession across major economies.

The spread of Covid-19 has become more a pandemic compared to the situation in December

2019 when it was restricted largely to China. This has raised concerns of the impact being more serious for the world economy as it affects the prospects of all affected countries. The WHO head has said that coronavirus has the potential to become a pandemic and that it was at a decisive stage now.

At the interbank foreign exchange market, the local currency opened at 71.90 to the US dollar. During the day, it hit a low of 72.29 and finally settled at 72.21, down 60 paise over its previous close.

Asian currencies are also trading with depreciating bias while the bloodbath in the equity markets continued for the fifth straight day.

“The rupee is expected to remain under pressure amid prevailing weak global risk sentiment. Today FPI withdrew heavily from the equity market and even the yen which till now was firm got impacted today for the first time. On the positive side, crude oil prices are down and the RBI has surplus forex reserves. Bond yields have not been impacted much as there is ample liquidity in the system and there is another Long Term Repo Operation (LTRO) slated for Monday,” said the treasury head of a public sector bank.

Crude oil prices have declined quite sharply and contrary to the expectation that the Opec would try and lift the price to the $60-plus region by invoking output cuts, the fear of recession has taken WTI crude to less than $50.

“Likely range for USDINR pair 71.72-72.05 with upside bias. Rupee could remain supported and could turn out to be a relative outperformer given low crude prices,” said

Abhishek executive

Global.

Sreejith Balasubramanian, economist at IDFC AMC said, “India’s growth could be impacted by the coronavirus depending on the duration and intensity of both its spread and containment measures across the world. While India’s direct trade linkage to China and Hong Kong is at 9 per cent of total exports and 17 per cent of total imports, supply chain disruptions and lower external demand would add to domestic issues and continued risk-off capital outflows could put pressure on emerging market currencies, although the RBI has been shoring up forex reserves. However, expectations of global monetary policy easing has already started rising amidst the uncertainty which still looms large.”

Goenka, chief officer at IFA