Covid-19 scare has spared rupee so far, shows report

Financial assets were roiled across the globe through late February as more cases of Covid-19 were reported from beyond the Great Wall, but the Indian rupee remained stable amid the ruins, losing 1.4% last month and outperforming many of its peers in the process, a Care Ratings study showed.

What’s even more remarkable is that China, the epicentre of the viral outbreak that’s sinking financial assets from Jakarta to Johannesburg, fared better. The Chinese currency lost 0.79% despite mounting concerns that unprecedented lockdowns across vast swathes of the Chinese industrial heartland would hurt Beijing’s economy, now the world’s second biggest and by far the largest in Asia. To be sure, the Chinese currency usually remains within a tight trading range against the US dollar.

As growth assets tumbled across the globe, the Russian rouble lost 5% in February; the Brazilian currency also fell by an equivalent amount against the US dollar, with economists assessing the impact of the spread of the disease on major economies and trading routes.

As an initial impact, stock markets across the globe crashed in February. Concerns of a slowing global economy have since then intensified on account of a series of travel bans, port closures, citywide lockdowns, and factory shutdowns to help prevent the virus from spreading. The global death toll from Covid-19 has already touched the 3,000 mark.

Countries with higher dependence on foreign trade and tourism have tended to be affected more in relative terms than India, which has a highly diverse and large domestic economy. Excessive trade dependence has led to currencies getting volatile with a tilt toward depreciation against the dollar, according to the Care study.

Currency markets were expected to be stable at the beginning of the year as the threat of a full blown trade war between the US and China had receded, with the world’s two biggest economies seemingly reaching agreements on various contentious trade issues.