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Indian Rupee Settles at Three-Month High on Foreign Inflows, Vaccine Hopes

July 2, 2020 at 19:10 by Andrew Moran

Many INR billsThe Indian rupee is settling at its best level against the US dollar in three months as foreign inflows and vaccine hopes elevated the currency. The rupee has been Asia’s worst-performing currency this year, driven primarily by the coronavirus pandemic and volatility in global financial markets. Could analysts’ forecasts of further appreciation in the second half of 2020 come true?

Because the US and other major stock markets have relatively stabilized in recent weeks, there is a greater appetite for riskier investments. India is an emerging market that attracts this type of trader, and the data suggests foreign investments have contributed to the nation’s rallying equity market.

Despite becoming a hotspot for COVID-19, traders are willing to take a gamble on India. In fact, India could be one of the biggest beneficiaries of central banks’ unconventional quantitative easing efforts. Markets are trying to prognosticate a course to navigate in the coming months, which is proving to be difficult due to the resurgence of the virus outbreak.

India has more than 605,000 confirmed cases of coronavirus, with nearly 18,000 deaths. The daily figures keep exploding.

With positive developments on the vaccine front, Indian markets have been rallying on hopes that a treatment could come to market by early next year at the earliest. But it is unclear how much more damage the country could face by then. Still, the benchmark S&P BSE Sensex jumped 1.2% on Thursday, and NSE Nifty 50 index settled 1.17% higher.

The nation’s manufacturing sector is showing signs of a rebound. The IHS Markit manufacturing purchasing managers’ index (PMI) jumped to 47.2 in June, up from 30.8 in May – anything below 50 indicates a contraction. This is the third consecutive monthly drop amid shrinking output, employment, new orders, and export sales, albeit at a slower pace. Business confidence has surged to a four-month high.

Last month, infrastructure output plunged at an annualized rate of 23.4%, up from a 37% decline in April.

Analysts will be watching to see if the rupee can stay below the 75 threshold against the greenback, which is currently the best level since April. Some analysts think the next target for the rupee is 74.

The USD/INR currency pair fell 0.93% to 74.7851, from an opening of 75.4636, at 19:03 GMT on Thursday. The EUR/INR tumbled 1.11% to 84.0000, from an opening of 84.9300.

If you have any questions, comments, or opinions regarding the Indian Rupee, feel free to post them using the commentary form below.

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