Dubai: India expats in the UAE might be better off waiting when sending in their next remittances, with the rupee inching higher slightly ahead of two key policymakers’ meeting this week. Today (October 31), the rupee is trading at 82.35 to the dollar after closing last week at 82.47 and well below the 83 plus mark it had hit October 19.
With their salary credits happening from this week, Indian expats will then have to decide whether the current exchange rate is good enough or whether to wait to see whether the INR slips closer to 83 levels. Early Monday, the AED-INR exchange rate is at 22.23 after having been at 22.40 and over levels last week.
So, will the INR drop? This week, the US Federal Reserve holds its next meeting to line up another likely 0.75 per cent increase, which if it happens would be the fourth successive hike in interest rates by that margin. Each time the Fed does that the dollar tends to firm up, and that always comes at the expense of the other currencies.
The INR hit the 82 and 83 mark within days of each other this month, as the Indian currency gave way against a rampant dollar to hit fresh lows. (Much the same happened with the yen, the euro, the pound and others too for various reasons.)
Will RBI counter?
There is another meeting this week, by the Indian central bank - an ‘unscheduled’ by its Monetary Policy Committee on November 3.
“There is speculation the RBI may increase rates by 0.50 per cent and the INR is expected to be in the range of 82.25 to 82.60 in the near term,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services. If so, “the INR is expected to trade sideways in the next few days.”
The RBI had been busy through the last week in trying to get the INR under the 82.50 mark, and a strategy that has worked by the looks of it. But it also means having to use up more of the country’s dollar reserves, now expected to be in the region of $500 billion plus to shore up the rupee.
Will RBI be using the same strategy in the coming days, and more so after the Fed hike? Indian expats in the UAE will need to watch this space…
Some traders were also speculating about the possibility of an unscheduled rate hike, which led the rupee forward premiums higher.