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The Indian rupee weakened past the 75-mark to hit a nine-month low against the dollar on Monday as foreign portfolio investors pulled money from local stocks and bonds amid a worsening coronavirus crisis.

The rupee opened at 74.96 and touched a low of 75.15 a dollar, a level that was last seen on 16 July 2020. At the close of trading in Mumbai, the currency settled at 75.06, down 0.42% from its previous close.

This was the sixth straight session of loss for the domestic unit, during which it has seen a depreciation of 193 paise.

Foreign institutional investors have sold stocks worth $730 million in the past month and $2.33 billion in bonds this year. Foreign investors were spooked by the sudden surge in new coronavirus infections, which is likely to further strain government finances, the nation’s underfunded public health system and derail the nascent economic recovery.

States across the country are considering partial or full lockdowns to contain the pandemic as hospitals get overwhelmed by covid patients.

India reported a record 168,912 new covid-19 cases in the past 24 hours, data from the Union health ministry showed. The resurgence of the virus led to 904 deaths in the past 24 hours, taking the toll to 170,179. There are 1.2 million active cases in the country.

Analysts said that the central bank’s policy of infusing liquidity into the system through the government bonds purchase programme, though good for the bond market, is negative for the currency.

There is now excess liquidity of 7 trillion in the reverse repo basket, and there will be an additional infusion of 25,000 crore on 15 April.

“So much liquidity in the system is not good news for the rupee. Add to this, the panic attack of the pandemic-induced lockdown and the news of shortage of vaccines, the economy does not look as strong as was conjectured," Care Ratings said in a report.

The rising US 10-year yield, selling by foreign investors, India’s widening trade deficit and rising global commodity prices could add to the pressure on the Indian currency.

Compounding the problem for the rupee, the dollar is expected to strengthen on better growth prospects and an orderly roll-out of vaccines in the US.

“Therefore, choppy times are ahead for the rupee. We need to see how the rupee moves and with the 75-mark reached, there should be some correction post the first government securities acquisition programme (G-SAP) auction. We still maintain 74-74.5/$ is the fair rate," Care Ratings said.

“Given repeated and sharper covid waves sweeping across the world, we believe full recovery might take much longer than earlier anticipated," said Prabhudas Lilladher in a report to investors.

PTI contributed to this story.

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