As the outbreak of coronavirus is making big waves in the global market, India observed a steep fall in the value of rupee against the dollar. The rupee looked unsettled in the local markets on Thursday after the Covid-19 cases are rising in the country. the fear of the virus has encouraged exaggerated bets on the Indian currency in the overseas rupee trading platforms. Institutions were selling the rupee in the offshore one-month forwards to a record of 75.15 a dollar. There was a gap of 65-70 paisa earlier Thursday as the one-month forwards in the local market stood at about 74.50 a dollar. India’s central bank announced a USD 2 billion dollar-rupee swap which is likely to be held on March 18th to ensure dollar liquidity.
The offshore rupee is showing signs of pressure on the local rupee and speculators have turned active due to the widening gap between offshore and onshore markets. The RBI’s announcement of USD 2 billion dollar-rupee swaps has put one-month NDF forward to come down about 10-12 paisa. However, the gap was within 10-15 paisa a few days earlier and the NDF forward against one-month on-shore premium remained elevated at about 50 paise.
The magnitude of the premium quoted in the offshore market for long dollar against the rupee continues to reflect the unwinding pressure of long rupee carry position as the risk aversion across asset classes has brought considerable pressure on emerging market currencies inclusive of the rupee. The currency may remain volatile in the near term as the fall in oil prices should stem the rupee’s decline. The rupee lost .77 percent to close at 74.21 a dollar on Thursday, an all-time low of after 74.48 a dollar on October 11th, 2018.