March to see remittance spike from UAE as Indian rupee, other Asian currencies drop
First week will be decisive for remittances if these currencies lose further ground
Dubai: With the Indian rupee slipping below 20 to the dirham, and some of the other Asian currencies too losing ground, UAE’s remittances are in for a sharp surge this week. It was on Friday last that the rupee lost ground after holding on the 19.30-19.50 levels to the dirham and went down to 20 plus.
That in itself should have set off an immediate increase in India-bound remittances, but “many NRIs were waiting for their February salaries to be credited before doing so,” said a banking industry source. “Also, many are hoping the rupee’s drop could continue this week before they send.”
Early on Monday (March 1), the rupee was at 73.59 to the dollar, 20.03 to the dirham.
It was in April last year that the rupee dropped to its lowest point. It was at 76.8 on April 16, and on April 22 it briefly tested 76.90.
Same wait-and-watch sentiments could be seen in store for other remittances. On February 25, the Philippines peso was at 49.08 to the dollar and has since slipped to 48.76. The Pakistan rupee is trading at 157.75 to the dollar, slipping from just over 160 on February 1.
Resurgent dollar
“All major currencies have lost over 100-140 basis points against the dollar,” said a senior official with the treasury operations at LuLu Exchange. “As for the Indian rupee, we can expect to see some more weakness, as Indian stocks too might witness some more corrections.”
That’s right, after powering to 50,000 points plus, the benchmark Indian stock market index has come under pressure in recent days. This week could be crucial, as foreign funds could engage in profit taking and be pulling these out of the markets/country. That will add to the pressure on the rupee.
“We feel the rupee might see 73.67, 73.84 and 74.08 to the dollar in the coming days before moving into a smart recovery,” said the LuLu Exchange official. “Then, it might move between 72.83-74.08, or 19.76-20.16 against the dirham.”
- On January 1,2020, the rupee opened at 71.30 to the dollar.
- The lowest it went down to was 70.73 on January 14, 2020.
- On March 19, 2020, rupee was at 75.28.
- On April, 2020 it was 76.80, and on April 22, tested 76.90.
Economy’s on the mend
Apart from the stock markets – or more specifically what foreign funds are doing - NRIs should also be monitoring all updates on the Indian economy. In the October to end December phase, the economy headed back into growth, though a marginal one at 0.4 per cent. But that’s still a huge positive after the deep contractions of the previous two quarters.
The general consensus is that rupee will not come under the sort of severe strain that was there during the March-July phase last year, when the lockdowns over the pandemic severely disrupted growth chances.