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The Indian rupee could weaken further against other currencies amid worries over rising COVID-19 cases.
On Tuesday morning, the Asian currency traded at 74.72 to the greenback compared with 73.44 per dollar on April 1, according to Bloomberg’s currency tracker.
The rupee had been advancing against other currencies before the second wave of coronavirus infections broke out in India, trading at 73.12 per dollar on January 1.
“The rupee has gained substantial value in line with other major currencies in the recent past as the trade deficit and the current account deficit have been improving. However, with the outbreak of the second wave, the currency has been seeing a fall,” said Yogesh Khairajani, global market strategist at Century Financial to Zawya.
“The rupee has already lost 2.6 percent against the dollar so far this month, putting it on the cusp of marking its worst month since the pandemic hit the country early last year.”
More economic pain
For the sixth consecutive day on Tuesday, India recorded the world's highest daily infection rate of more than 300,000, raising the overall tally of confirmed COVID-19 cases in the country to nearly 18 million.
If the situation is not contained soon, Khairajani said the local currency could trade “with a depreciating bias on the back of a stronger dollar” and breach the 76 mark in the near term.
He noted that the latest restrictions and lockdowns imposed in the country to curb the infections “have seemed to already weaken the economic activities”.
“Investors are worried about more economic pain leading to massive across-the-board selling. In spite of the Indian government’s effort to control the rising coronavirus cases by opening up vaccines to all citizens above the age of 18, it could possibly take weeks and months to control the pandemic,” he said.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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