The Indian rupee fell for the third consecutive trading late Monday, retreating to its lowest level in more than 15 months, after two fresh cases of the novel coronavirus was detected in the country.
Experts cautioned that any increase in capital flight from financial investors could jolt the Indian rupee in the midst of declining macro-economic indicators. The local core inflation has been stagnant and if inflation shocks further on the upside, the rate differential between India and the US could tighten, resulting in capital flight.
Health officials reported on Monday two more positive cases of the virus in India -- one in the capital city of New Delhi and the other in Telangana. The patients recently traveled to Dubai and Italy, respectively, authorities said. Both patients were in stable condition and are being closely monitored. India's total number of patients with coronavirus is now five.
The outbreak believed to have emerged from the Chinese province of Hubei has so far claimed the lives of 3,000 people globally as health experts race to contain the rapid spread of infections in Iran, Italy, Japan, South Korea, and the US.
The partially convertible rupee ended the session 0.5 percent lower at 72.7650 per USD, its weakest level since Nov. 13, 2018. In the last three tradings, the Indian currency has lost 1.7 percent of its value.
Moving forward, as per seasonality trend, the Indian rupee typically should appreciate in value against the greenback, as corporates would be receiving remittances ahead of the fiscal year 2020's closure of accounts, analysts said. In the last decade, the rupee has appreciated on seven occasions versus the US currency in March, analysts added.
Financial investors, as cited by Reuters, noted that the rupee could drop further with 73 per USD, and likely to be tested in the next few days. However, they anticipate the Reserve Bank of India to step in and unload dollars to avert more declines in the local currency market.
News of the newly reported cases dragged local stocks down, with the broader Nifty Share Index shedding as much as 1.6 percent before ending the day's trade under 0.63 percent.
Earlier in the trading, the market climbed as much as 2.2 percent on optimism that major financial lenders would take extra efforts to normalize money markets amid the virus scare. Meanwhile, the US dollar index, which measures the currency's strength against a host of six key currencies was trading 0.15 percent lower at 97.98.
