The rupee plunged to 73.24 per dollar (19.95 against the dirham) in the evening after registering a rise of 33 paise over its previous close in the morning.
On Monday, the rupee had settled at 72.76 against the greenback.
As investor sentiment remained fragile amid concerns over the impact of the coronavirus outbreak after two fresh cases were detected in India, the rupee outlook appeared to further favour the downside with the country facing the threat of stagflation.
In the near term, analysts expect the currency to be more volatile and inch towards the 73.50-mark if the virus spread is not contained.
Pradeep Unni, Head of Strategic Business Development, Richcomm Global Services DMCC, said the rupee which was until date relatively immune to the coronavirus outbreak, fell to over a 15-month low of 73.24 to a dollar on Tuesday.
“Though fresh cases of coronavirus in India triggered the selloff, it was the fear of risk aversion that added momentum to the slide. In addition to this many global organizations have been downsizing India’s growth projections. The rise of safe-haven gold and even the dollar to some extent has weighed on the rupee,” said Unni.
The market is expecting that global central banks including Reserve Bank of India will be forced to slash interest rates and provide stimulus to support the currency from a deeper slide.
Analysts said it would be difficult for the RBI to hike rates without raising concerns about the banking sector. The country’s economy has taken a toll over the past two years. In the third quarter of 2019-2020, GDP clocked in at 4.5 per cent year on year, which was the softest pace since 2013 and down from 9.4 per cent in the second quarter of 2016.
Indian bourses opened on a positive note on Tuesday with benchmark indices Sensex trading 458.88 points higher at 38,602.90 and Nifty up by 158.90 points at 11,291.65.
Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold equity shares worth Rs13.55 billion on Monday, according to provisional exchange data.
While the month of March is typically good for the Indian rupee as remittances, from both Indians and companies, tend to buoy the exchange rate, this time, the currency has had to deal with an unexpected Coronavirus outbreak that threatens to derail global growth besides claiming lives across continents.
Over the past 10 years, the rupee has appreciated seven times against the dollar in March. But the rupee’s sharp drop to over 73 per dollar shows that a different March is in store for it this year, a note by IFA Global said.
“The contagion effect will become the primary driver sidelining other external factors such as dollar index, crude oil, and yuan if coronavirus turns into a global pandemic," it said.
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