The Indian rupee is sliding against many of its major currency competitors at the end of the trading week as the coronavirus pandemic and poor economic data weigh on the currency. Despite its impressive appreciation over the last three months, the rupee has had a rough week without any end to the public health crisis in sight.
India now possesses the second largest number of COVID-19 infections, only behind the United States. In total, the developing country has more than 4.56 million confirmed cases, with more than 76,000 deaths. On Friday, it had its biggest single-day spike of about 96,000 new infections.
But while global financial markets are keeping an eye out on the coronavirus outbreak, there are other factors that investors are monitoring, including the macroeconomic data and monetary policy efforts.
Manufacturing production contracted at an annualized rate of 11.1% in July, up from the 16% plunge in June. Industrial output tumbled 10.4% year-over-year in July, up from the 15.8% slide in the previous month. Both readings represent the fifth consecutive month of falling output because of the COVID-19 public health crisis and the coronavirus-induced financial crisis.
According to the Reserve Bank of India (RBI), foreign exchange reserves surged to $542.013 billion in the week ending September 4, up from $541.431 in the previous week. Deposit growth rose 11% in the week ending August 28, while bank loan growth jumped 5.5% YoY.
Next week, trade and inflation data will dominate domestic markets.
Despite the central bank trying to weaken the rupee, it has been supported by foreign capital inflows. The RBI endeavors to boost exports and keep interest rates low by depreciating the rupee. But analysts think that the rupee has some room for growth, particularly if there is no other major market meltdown in the US market comparable to earlier this year.
On the geopolitical front, China and India have agreed to disengage from a border standoff. The nations’ foreign ministries issued a joint statement and noted that the rising tensions are not in the best interest of either country. Therefore, moving forward, border troops will disengage, initiate dialog, and ensure proper physical distance.
The USD/INR currency pair edged up 0.02% to 73.4560, from an opening of 73.4401, at 18:55 GMT on Friday. The EUR/INR climbed 0.18% to 86.9400, from an opening of 86.7700.