has remained largely stable at a time when global currencies are experiencing a rout against the US dollar.
Year-to-date, the Brazilian real has lost 8.31 per cent of its value, while other emerging market currencies have fallen 3.5-7.5 per cent against the dollar on growth concerns in their economies.
The dollar index, which measures the greenback’s strength against major currencies, rose to 99.49 from the 97.5 level seen in January. Year-to-date, the euro has fallen 3.55 per cent, while the Japanese yen has lost 2.80 per cent against the dollar.
The world economy was recovering from a US-China trade war when the coronavirus crisis hit crucial inputs from China, which could be dragging down global growth rate, according to various agencies. This may have led to demand for safe haven currency such as the US dollar.
However, even as India’s growth rate has fallen, foreign portfolio investors have been pouring in money. After having cut their positions in debt in the run-up to the Budget, foreign investors have now started investing in debt.
Currency dealers say the central bank is intervening so that the currency doesn’t strengthen more. The rupee
ended at 71.66 a dollar on Thursday. The rupee
had ended 2019 at 71.38 a dollar.
Year-to-date, foreign investors have put in $3.429 billion in local equities and debt, most of it coming after the Budget. Since the Union Budget was presented on February 1, the net inflow has been nearly $3 billion as investors increased their bond purchase. They have been net sellers of debt before the Budget.
According to a bank treasury head, even as bond yields have fallen in recent times, it still provides an attractive level for foreign investors. With currency volatility kept in check, foreign investors get to earn 3-4 per cent on an unhedged basis, considering 2 per cent natural depreciation of the rupee.