MUMBAI: Indian rupee on Thursday strengthened nearly 1% against the US dollar tracking rally in global equities and currencies after the US Senate passed a $2 trillion stimulus package.

At 11.04 am, the domestic currency was trading at 75.38 a dollar, up 0.9% from its previous close of 76.10. The rupee had opened at 75.89 and touched a high of 75.18 a dollar.

The 10-year government bond yield fell 2 basis points to 6.285% from its previous close of 6.304%.

The US Senate approved a $2 trillion stimuls plan after days of intense negotiations, putting pressure on the House to pass the bill quickly and send it to US President Donald Trump for his signature.

In India, traders await a potential fiscal stimulus package from the government after a 21-day lockdown was announced to contain the spread of coronavirus . According to a Bloomberg report, the Reserve Bank of India is expected to infuse cash in the banking system via its open market bond purchase and repo operations later on Thursday.

Earlier, Reuters reported that India is likely to agree on an economic stimulus package of more than 1.5 trillion to fight effects of the coronavirus outbreak.

The government may raise its budgeted 7.8 trillion borrowing plan for the fiscal year starting April and ask the central bank to buy some government debt, the Reuters report added.

"We expect the central government to soon announce a stimulus package of ~0.7-1.1% of GDP. Along with the growth hit and poor tax collections, we expect the fiscal deficit for FY21 (year ending March 2021) to balloon by over 1% of GDP from the 3.5% target set in the budget (i.e. more than the escape clause leeway of 0.5% of GDP)", said Nomura Research in a note to its investors.

RBI's next monetary policy is scheduled on 3 April and analysts expect the central bank to cut rates by at least 50 basis points.

"We expect 65bp of rate cuts by Q2, with 50bp delivered on or before 3 April, with the RBI likely to announce more measures to ease liquidity, forbearance and broader macro-prudential norms", Nomura added.

(With Agency inputs)

My Reads Logout