Dubai: The Indian rupee has started the week under duress, trading at 21.74 to the dirham and the likelihood of a further drop. If the decline becomes more pronounced, it could test the 21.79 level (80.06 to the $), which was the previous all-time low on July 18.
“More than anything that’s suddenly happened with the Indian economy, it’s the dollar’s renewed strength that’s piling pressure on the rupee,” said an FX analyst. “The short-term forecast is for a repeat of the drop to 20.79 unless there’s a major intervention.”
Analysts are veering towards the opinion that an entry by RBI (Reserve Bank of India) to halt the rupee slide will more likely if it hits 81 to the dollar. The current rupee-dollar levels are seen as comfortable for Indian exporters, while India is also not using up too much of dollar reserves on oil imports because of the rouble arrangement with Russia.
For Indian remitters in the UAE, any further dip in the rupee before September would come in handy, especially with the start of the festival and marriage seasons. Through most of August, the rupee had been in the 21.50 plus levels against the dirham, and remittance volumes had been steady.
But that will change in September and October, and the volumes will be given another ballast at levels closer to 21.80. For Indian expats, best option is to wait for whatever signals the currency markets send in the next 48 hours.
According to K.V. Shamsudeen, the near-term prospects for the rupee is for further weakening. “A decline for major currencies against the dollar is a ‘natural phenomenon’ these days, and there is not much to be done through market intervention,” said the Director of Sharjah-based Burjeel Geojit Financial Services. “This is not a situation happening with India alone.
“Only the tiniest push will take the rupee past 80 to the dollar and that could soon become the new normal.”
The RBI had reserves of $573.9 billion by late last month, which represents some stability after four weeks of decline. This is also why FX markets believe that the central bank will limit a forceful move to stabilise the rupee.
For Indian expats, all of which smacks of possibilities when their next remittance comes around…