Indian rupee
Rupee's under fresh pressure, now trading at 20.16 to the dirham. Image Credit: Pixabay

Dubai: The rupee Friday has dropped to within touching distance of its all-time low of 20.22 to Dh1, which was the level on October 9, 2018. It is now trading at 20.16 to the dirham, and market sources say that everything now depends on how quickly the Indian government makes an intervention.

Currency exchange houses in the UAE say that many NRIs had been taking a “let’s wait” approach after the rupee breached the 20 level on Wednesday, to around 20.07. All through yesterday, it had regained some strength, to be in the 19.95 range.

But touching 20.13/20.16 could be the trigger for a spurt in remittances over this weekend. Any which way the currency moves, local exchange houses are bracing for a busy weekend.

But, according to Anthony Jos, Director at Joyalukkas Exchange, "In fact, a remittance rush had started when the rupee fell to the 19.60 range a few days ago. Now, it has slowed a bit - most of the remittances have already happened, I suppose.

"The rest are waiting for their salaries to be credited."

There is an expectation that the rupee will reach its lowest point ever - 20.22 to dirham - before the market closes today

- Anthony Jos of Joyalukkas Exchange

Waiting for signals

India’s central bank has all through this week been saying that it would do everything possible to stem any derailing of the country’s economic growth from the coronavirus spread. But so far, India’s stock market and its currency have been unmoved by the talk. Sentiments on the key stock market index, Sensex, have been weak all through this week.

According to Siddarth Razdan at Indianivesh Fund Managers, "The rupee will be volatile short-term - but what one needs to watch out for is what Reserve Bank of India does with its record $476 billion in dollar reserves. When will they start using some of that to control rupee's decline - that's what everyone is watching out for.

"In fact, some of the recovery in the rupee on Thursday, when it went back to 19.95 levels to dirham, is part of that."

Putting out too many fires

Not that the Reserve Bank of India has been idle - on Thursday evening, it started on the rescue act at the troubled Yes Bank, one of the country's biggest private banks and which in recent years was caught out by loans to corporate clients turning toxic. Yes Bank has quite a significant share of UAE/Gulf NRI deposits, which is why its future is of utmost importance to expat Indians as well.

The RBI has placed restrictions on deposit withdrawals - at 50,000 rupees per account a month - and superseding all decisions taken by the Yes Bank board of directors. Also, the State Bank of India will invest in Yes Bank as a first step towards nursing it back into health.

Even to Yes Bank staff, the RBI move came as quite a surprise. "We will have an idea of what to inform our clients, including NRI deposit holders, later in the day," said an employee. "Every effort will be made to convince them that the restrictions on cash withdrawals are for the short-term and being done to ensure the longer term health of the bank."

The Yes Bank shares dropped 55 per cent during Friday's morning session. The Sensex is down 1,200 points.