The Indian rupee is weakening to its lowest level in two weeks against the US dollar on Tuesday. The rupee, which had rallied in recent months, is beginning to slump as forex markets home in on economic data and the worsening coronavirus public health crisis. With the government starting to reimpose pandemic restrictions, is the emerging market currency’s appreciation about to come to an end?
India reported more than 28,000 new COVID-19 infections on Monday, raising the total to more than 907,000. The death toll is just below 24,000. The pattern has forced officials to reinstitute lockdown measures to try to contain the virus outbreak. Although the government has refrained from implementing another nationwide shutdown, the health authorities will target specific regions.
For instance, Bangalore is one of the places that will be under lockdown until July 23. Many services will be closed, except for essential services, public transportation, and certain grocery stores. Restaurants can operate, but they can only offer takeout or home delivery. Also, for people who have undergone COVID-19 testing, officials are recommending “strict isolation or quarantine at home.”
But it is not only India that is resorting to pandemic restrictions. Hong Kong, parts of Australia, and a couple of US states are reimplementing lockdown measures after spikes in infections. In total, the world has more than 13 million confirmed cases and about 573,000 people have died.
All eyes are on the latest inflation numbers as the consumer price index (CPI) rose to 6.1% in June, breaching the Reserve Bank of India (RBI)’s 6% target rate. The biggest driver of the CPI was food price inflation, which surged nearly 8% last month. Wholesale prices edged up at an annualized rate of 0.08%, while fuel prices plunged 13.6% year-over-year.
In other data, foreign institutional investors sold a net $2.6 billion in equities and $14.27 billion in debt this year.
Later this week, trade, foreign exchange reserves, and credit market data will be released.
The USD/INR currency pair rose 0.2% to 75.36, from an opening of 75.21, at 16:32 GMT on Tuesday. The EUR/INR advanced 0.72% to 85.94, from an opening of 85.33.