Mumbai, Mar 23 (PTI) The rupee on Monday crashed by 100 paise to settle at its lifetime low of 76.20 against the US currency due to heavy dollar demand and meltdown in equities as lockdowns to contain coronavirus spread fanned recession fears.
The domestic currency suffered its biggest single-day loss in more than seven months as FPIs remained net sellers in capital markets.
'Pandemic is causing widespread lockdowns, causing the economy to grind to halt. In such a situation, emerging market currencies are vulnerable due to their dependence on dollar debt. A scramble for dollars would continue as long as the panic lasts,' Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities said.
Market participants are concerned that the sharp rise in coronavirus cases, which has crossed over 400 in the country, could weigh on the economy, traders said.
The rupee which opened on a weak note at 75.90 at the interbank forex market, sank to an all-time trading low of 76.30 mirroring deep losses in stock markets.
The unit finally settled at 76.20 against the US dollar, registering a decline of 100 paise over its last close.
According to the Union Health Ministry, COVID-19 cases in India increased to 415, forcing lockdowns in various states.
'The currency has been weighed down in the last few sessions also due to broad strength in the dollar against its major crosses. On the domestic front, FIIs continued to remain net sellers in the equity and debt segment and selling has been to the tune of over USD 11 billion,' said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Traders said there is a sense of anxiety among investors as they see the global, as well as domestic economy, plunging into a deep crisis due to coronavirus (Covid-19) pandemic that has killed over 15,000 and sickened lakhs of people around the globe.
Moreover, the steep decline in domestic equities and sustained foreign fund outflows further dampened the sentiment, they said.
Foreign investors remained net sellers in Indian capital markets as they pulled out around Rs 3,000 crore on Monday, market data showed.
On the domestic equity market front, the BSE ensex plummetted 3,934.72 points to 25,981.24 on Monday after several Indian states announced lockdown following a spurt in the number of coronavirus cases. Likewise, the NSE Nifty nosedived 1,135.20 points or 12.98 per cent to settle at 7,610.25.
“The ripple effect of the coronavirus crisis is creating a lot of turbulence in the financial markets space. It has led to a lot of concerns about impending economic turmoil, steering significant outflows from domestic equities and, causing the domestic currency to depreciate,' said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.06 per cent to 102.75.
The 10-year government bond yield was at 6.38 per cent.
Global crude oil benchmark Brent fell 4.45 per cent to USD 25.78 per barrel amid concerns over global growth.
'Reserve Bank of India supplied USD 2 billion via a forex swap today to provide liquidity to the foreign exchange market. It will also conduct 500 billion rupees of debt purchases today and 150 billion of debt purchases tomorrow via an open market operation,' said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.0063 and for rupee/euro at 80.6458. The reference rate for rupee/British pound was fixed at 87.4203 and for rupee/100 Japanese yen at 68.19. PTI DRR MR