Dubai: The Indian rupee has dropped to a new low, with the currency starting the week at 21.81 and could be in for 21.80-21.85 range. The previous low of 21.79 was hit on July 18 - and for Indian expats in the UAE could open up clear remittance options for early September.
The rupee dip was always on the cards after the dollar made gains late last week following the US Fed chief’s comments about more interest rate increases to fight inflation. The dollar index – which measures the greenback against a selection of global currencies – is at 109.29 and looks set for more increases.
The rupee is now at 21.78, but currency traders say it’s unlikely the market will see the RBI (Reserve Bank of India) intervene, at least for the next 48 hours.
On Sensex, Indian main stock market index, there is a major freefall happening, dropping more than 1,000 points in the first few minutes of trade starting.
“It was always on the cards that the rupee would slip to a new low, even though it might still take longer for the 22 to dirham level,” said a senior treasury analyst. “The pressure on rupee will be strong closer to the month end, because of the dollar settlements that will take place, and cause heavy demand among Indian corporates for the US currency.
“This would mean pressure on the rupee could be unremitting in these 48 hours.” (The Indian market will remain closed on August 31 because of the festival of Ganesh Chaturthi.)
Set up for high remittances
September marks the beginning of the new festival season in India, and that’s always translated into high remittances during September and October. Exchange houses expect heavy dirham-rupee transactions in the next few days, or as soon as Indian expats start seeing their August salaries being credited.
I think the weakness in the rupee will continue in the near term. This is in tandem with the impact that is being witnessed across major currencies, and rupee is likely to be in the range of 21.75 to 21.85
Stable for the most part
All through last week, the rupee had been holding up against the dollar onslaught, in the 21.70 plus range, at a time when the euro dropped below parity with the dollar. The UK pound too dipped to its lowest for the year.
But a lot changed after the US Fed chief Jerome Powell came out with fighting words of further rate hikes. And that would only mean more dollar gains.
- Mitul Shah, Head of Research at Reliance Securities