India Rupee Snaps 5-Week Fall As Dollar Index Declines

India Rupee Snaps 5-Week Fall As Dollar Index Declines

27 Mar 2020 05:29 PM

The Indian rupee logged its first weekly rise in six weeks against the U.S. currency, tracking a sharp fall in dollar index due to weak U.S. jobs data and the Federal Reserve's unlimited quantitative easing pledge.

The rupee was quoted at 74.85 against the dollar compared with 75.15 at 5.00 pm yesterday. The unit was up 0.5% this week, its biggest weekly rise since the week ended Jan. 10, after falling by an aggregate of 5.4% in last five weeks.

The unit traded in over one-rupee range today, and sharply retreated from the day's low of 75.40 on suspected intervention by the RBI in spot as well as in futures.

“The weakening dollar index may have given a temporary respite to the rupee, but volatility in the forex market will continue to remain high, as focus will completely shift to the number of domestic coronavirus cases.

The dollar index is poised for its worst weekly decline since 2009 after the U.S. Federal Reserve announced that will buy potentially unlimited amount of assets and agency mortgage-backed securities to offset the immediate economic hit from the virus. Further, the Fed said it will back purchases of corporate bonds and announced credit facilitates to support new bond and loan issuance to provide liquidity.

Further putting pressure on the dollar index was a dismal U.S. jobs data which showed that the number of Americans filing claims for unemployment benefits rose to over 3.28 million last week, up from the previous peak of around 700,000 printed during the 2008 crisis.

U.S. has been hit hard by the coronavirus, with the country reporting around 84,000 coronavirus cases from 20,000 a week back. The U.S. approved a $2-trillion fiscal stimulus bill earlier in the week to offset the impact of the virus.