India’s currency has swung from emerging market leader to laggard as the country battles a ferocious wave of coronavirus infections, prompting concerns among global investors that a nascent economic recovery will crumble. The rupee has dropped about 3 percent to 75.14 per dollar since the start of April, the worst performance among a basket of two dozen emerging market peers tracked by Bloomberg that includes Russia’s rouble and Turkey’s lira.
That marked a stark reversal after a stellar start for India’s currency in 2021. Its rise ofjust under 1 per cent between January and March had made the rupee the only emerging market currency to gain ground on the dollar.
The currency’s tumble came amid a surge in Covid-19 cases that has overwhelmed India’s health systems and stoked public outrage as the government struggles with sufficient vaccine supplies. It will also likely compound corporate India’s financial woes and complicate the central bank’s plans to use monetary stimulus to soften the economic blow.
“The surging virus cases are hitting everything,” said Kiyong Seong, an Asia strategist at Société Générale, pointing to a sell-off in Indian equities that has pushed the benchmark Sensex index more than 5 percent lower since hitting an all-time high in February.