STOCK Indian rupee
The Indian rupee has come fresh pressure, pushing it past the 82 mark. In dirham terms, this year has already seen the rupee go past the 21 and 22 to dirham mark within months of each other. Will it hit 23? Image Credit: Bloomberg

Dubai: The Indian rupee has broken through to a new low, going past 82 to the dollar. In dirham terms, it is trading at round 22.36-22.39 levels.

The currency is trading at 82.25-82.27 levels early Friday (October 7) - "We had been expecting a drop, but only around the 82 mark," said Neelesh Gopalan, a Dubai-based FX analyst with a fintech. "But dropping to just short of 82.30 has come as a surprise."

The current INR-AED exchange rate is 22.26 against yesterday's close at 22.15.

The INR closed at 81.88 yesterday. In the year-to-date, the rupee is now down by 11.46 per cent. On May 9, it fell below 21 to the dirham, and the late September, hit the 22 mark.

The rupee thus has come under renewed pressure, after managing to hold its own through the last few days. The Indian central bank - RBI - had actively been shoring up the rupee against the dollar/dirham, but market watchers were concerned that this also meant using up India's dollar reserves, which are over the $500 billion mark.

Will RBI step in again? Market sources say more intervention - by selling dollars in the open market - will be needed as the dollar keeps to its high levels. "The threat is that the INR could slip all too quickly to 23 against the dirham if the RBI is not willing to take steps," said an FX source in Mumbai. (India's dollar reserves were at $573.9 billion at of end July. It was at its peak of $642 billion in September 2021.)

It was last Friday that RBI raised the inter-bank lending rate to 5.90 per cent, doing what central banks the world over have been trying to do - raise rates to curb inflation. The rupee stabilised after the RBI action - but today's turn of events suggest stronger remedies might be needed. 

What should UAE's Indian expats do on remittances?
Since the start of the month, with rupee sticking to 22 plus levels against dirham, remittance flows from UAE to India have been averaging higher than usual, according to currency exchange sources.

Early Thursday, the remittance rate is 22.15, while the highest over the last 10 days was 22.19.

That's been revised to 22.26 now.

The Indian stock market has opened in the negative, with the Sensex down 300 points at 8.08 UAE time. It has since lowered the drop to around 135 points.

"RBI may have to keep up with the monetary policy tightening," said Mithul Shah, Head of Research at Reliance Securities. Further rate hike of 35 bps is expected in December followed by a pause with the RBI assessing US Fed actions, and impact of past rate hikes on domestic growth and inflation.

"Indian currencies remain strong vs other markets, all currencies have depreciated against the USD."

But will this new burst past 82 be the signal for further rapid drops?