Dubai: The Indian rupee is trading at a fresh low of 22.29 to the dirham (or 81.88 in dollar terms), as market concerns over an upcoming global recession weigh on currencies other than the dollar. For the INR, there could be increased uncertainty until Friday, which is when the country's central bank will meet and come up with another rate hike.
Whether a rate hike on its own will stabilise the currency is moot - but UAE's Indian expats have already started taking advantage of the rupee's drop. Overnight, the exchange rate was at 22.09 and that's in for a further revision going by the early trends today (Wednesday).
The current exchange rate in the UAE for INR-AED is 22.18.
The earliest low point for the INR was 81.68 to the dollar, or 22.23 in dirham terms. In early trading today, the currency dropped to 22.92 at one point before pulling back. (The INR's closing over the last two days was at 81.30 and 81.58.)
“The RBI is expected to increase rates by a minimum 50 basis points Friday, and that could stop the drop in the rupee value,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services. “But given the broader trends in the global economy, that stability could be temporary.
The markets are not predicting the RBI to intervene too strongly until Friday's meeting. So, by the looks of it, the current INR-USD trends should remain until Friday.
The rupee’s decline is in sync with what the pound, the euro, yen and other have been experiencing. The Chinese yuan has also slipped to lows against the dollar today despite efforts to stabilise the currency. In comparison, the Pakistan rupee is holding up, at 236 to the dollar.
Dollar power fires on all currencies
“The INR should see some high activity in the currency markets for the next few hours, at least until the UK and Eurozone markets open,” said an FX analyst. "Today, the pound sterling could get more attention - it would be interesting to see whether it touches parity with the dollar. There could be some announcement from the UK government or the Bank of England to try and place some floor under the pound's decline."
"As for euro, it's still trading below $1. Investors are spooked and it's all showing up in the global markets."
The INR has depreciated close to 10% this year and historically such a trend is followed by higher NRI remittances to India from the GCC, and in particular from the UAE.
Ramachandran told Gulf News, "The INR has depreciated close to 10% this year and historically such a trend is followed by higher NRI remittances to India from the GCC, and in particular from the UAE.
"NRIs at this juncture should judiciously allocate their remittances to increase their investments to the financial markets by way of SIPs, reduce any long-term liabilities on EMI payments, and also consider need-based investment into real estate."