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Pre Session Commentary
Indian Rupee: Dollar Weakness Could Support
26-Mar-20   09:06 Hrs IST

Weakness in dollar overseas following a US $ 2 trillion stimulus package could boost risk sentiment. The Indian rupee snapped a four session losing streak to end high on Tuesday against the US dollar after Finance Minister Nirmala Sitharaman said the government is working on an economic package to deal with the coronavirus crisis. Rupee which started the day on a positive note, witnessed heavy volatility amid concerns over the impact of coronavirus outbreak on the domestic economy but recovered after the government said an economic package is under works to tackle the coronavirus-led lockdown. Moreover, investor sentiment improved after the Reserve Bank as part of its effort to boost liquidity said it will conduct Rs 1 lakh crore of short-term variable repo auction. The repo auctions will be conducted in two tranches. The first repo auction of Rs 50,000 crore was held on Monday. The second tranche of Rs 50,000 crore of repo auction was to be conducted on Tuesday.

The recovery in domestic equities, which closed 693 points higher on Tuesday, also supported the local unit. At the interbank foreign exchange market, the local currency opened at 76.02. During the day it saw a high of 75.94 and a low of 76.40 against the American currency. The domestic unit finally settled at 75.94 against the greenback, up 26 paise over its previous closing price. The local unit had settled at 76.20 against the greenback on Monday. On Wednesday, currency markets were closed for the Gudi Padwa.

The domestic stock market surged on Wednesday, tracking strong global shares. The rally was triggered by the US policymakers reportedly clearing a $2 trillion stimulus package to fight against fast-spreading coronavirus. The Nifty settled above the 8,300 mark, backed by strength in index major Reliance Industries and private sector banks. The barometer index, the S&P BSE Sensex, surged 1,861.75 points or 6.98% at 28,535.78. The Nifty 50 index jumped 516.80 points or 6.62% at 8,317.85. The trading activity on that day showed that the foreign portfolio investors (FPIs) sold shares worth a net Rs 1893.36 crore yesterday, 25 March 2020, as per provisional data released by the stock exchanges.

Overseas, most Asian markets were trading lower on Thursday as investors await the passage and details of a $2 trillion stimulus package in the United States to combat the economic fallout from the coronavirus. In US, stocks on Wednesday finished well off their highs and the Nasdaq turned negative in the final minutes of trade, as the passage of a $2 trillion economic rescue package appeared to hit a snag.

Meanwhile, the dollar fell against the yen and the euro on Thursday before data expected to show a surge in US claims for unemployment benefits as companies lay off workers due to the rapid spread of the coronavirus. The pound extended declines against the euro and the dollar due to worries that Britain is not prepared to deal with an increase in coronavirus cases after the flu-like illness ravaged health care systems in Italy and Spain.

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