Mumbai, Mar 03 :
The rupee weakened sharply against the US dollar on Monday, tracking domestic indices that fell after two fresh cases of coronavirus were confirmed in India. The currency closed 55 paise lower at 72.73 against the dollar, the lowest level since November 13, 2018. This is the third consecutive day of decline in the rupee, losing 1.6 per cent of its value.
Experts warned that any escalation in capital flight from emerging markets could spook the rupee amid weakening macro economic indicators. The domestic core inflation has been sticky and if inflation surprises further on the upside, the real rate differential between the US and India could narrow, resulting in capital flight.
Other emerging markets are in the initial stage of becoming the victim of a contagion effect, last occurred in 2018.
Foreign Institutional Investors (FIIs) have sold Indian stocks worth Rs 13,011 crore last week while on Monday they sold stocks worth Rs 1,355 crore.
“The spread between offshore and onshore forward points is between 10-12 paise indicating massive unwinding of offshore carry positions,” said Abhishek Goenka, founder and chief executive officer at IFA Global, a forex consulting firm.
“Going ahead, as per seasonality pattern, the rupee ideally should appreciate against the USD as corporates would be receiving remittances ahead of FY19-20 closure of accounts. In the last 10 years, the rupee has appreciated seven times against the dollar in March,” added Goenka.
