The Indian Rupee fell against the US Dollar on Friday, opening at 71.18 to the Dollar, down from 71.20 as the crude oil futures rose by 0.6%.
Fears surrounding the economic impacts that the coronavirus epidemic may have on the markets are growing as the Chinese economy is edging towards a potential major shutdown. Large suppliers in China are already missing deadlines with companies in the USA including Apple.
This uncertainty has seen the Crude Oil futures trading at $55.27 per barrel and the prediction is that they will see another week of losses.
The rising oil price was a major factor in the slight fall against the Dollar, with further falls possibly to be expected in the near to mid future.
The Reserve Bank of India decided to play it safe and help to maintain the Indian domestic markets by holding the central interest rates for interbank loans (repo rate) at 5.15 %. This will keep the short term funds to commercial banks flowing with a stream of short term loans, but it’s a stop gap solution for the economy meaning further measures may have to be taken if the crude oil continues to rise.
Market commentators have been pointing out for some time now that the Indian economy has been suffering through a phase of high levels of inflation as well as high levels of unemployment. The inflation is leading to higher food prices which is putting a strain on the domestic economy; reducing disposable incomes and limiting small investments. According to an IFA Global insider, the Reserve Bank of India is planning to ‘unclog credit channels’ in order to provide ‘low cost liquidity’ to the commercial banks that the high streets rely on.
Nonetheless, the Rupee looks set to see further losses against the US Dollar over the coming weeks, with most Forex experts predicting that the Rupee will hover between the 70.70 and 70.20 for the foresable future.