ANZ: Risks to further INR weakness remain high, USD/INR gaps down to 73.00

In the view of analysts at Australia and New Zealand (ANZ) banking group (ANZ), the Indian rupee remains exposed to further downside risks in the near-term amid persisting coronavirus crisis.

Key quotes

“Expect RBI to keep intervening in order to maintain rupee competitiveness vis-à-vis Chinese yuan.

Fed's emergency 50 bps cut may stem decline in rupee in near-term but if contagion spreads, INR may fall more.

Believe risk to further near-term rupee weakness high, especially given seasonal weakness in Apr-Jun.

INR’s relative resilience has given way due to heightened global market volatility, more virus cases in India.”

USD/INR drops to test 73.00

The rupee bulls were rescued by the emergency Fed rate cut overnight that sent the US dollar broadly lower to a new-month low of 97.00. The collapse in the US Treasury yields as investors ran for cover in the US bonds knocked-off the greenback.

In response to the Fed surprise move, the USD/INR opened Wednesday’s trading with a bearish gap of about 23-pips to test the 73.00 support area.

At the press time, the spot trades flat, printing daily lows at 73.03.