Indian rupee hits new record low against UAE dirham as remittance boom gets bigger

Dubai: The Indian rupee has fallen to its weakest level ever against the UAE dirham, pushing remittance values sharply higher for millions of Indian expatriates in the Gulf while raising concerns over inflation, rising import costs and prolonged pressure on India’s economy.

The rupee weakened to around Rs96.34 against the US dollar on Monday, taking the UAE dirham — which is pegged to the US currency — above Rs26.22 for the first time. (Check live forex rates here)

For UAE-based Indians, the currency decline has created one of the strongest remittance windows in recent years. Salaries sent home from the Gulf are now converting into significantly higher rupee amounts compared to earlier this year, boosting transfers for family support, education expenses, mortgages and investments back in India.

The rupee has now depreciated by around 6-7 per cent against the US dollar this year, after starting 2026 near the 89 mark before sliding beyond 96. The decline has intensified since geopolitical tensions in the Middle East triggered a surge in oil prices, increasing pressure on India’s import bill and widening the country’s current account deficit.

India imports more than 80 per cent of its crude oil requirements, making the economy highly vulnerable to energy price spikes and dollar demand.

The weakening rupee is expected to trigger another surge in remittances from the UAE and wider Gulf region, where millions of Indian expatriates regularly send money home.

Currency exchange houses across the UAE typically see sharp spikes in transaction volumes whenever the rupee falls rapidly against the dirham.

For Indian expatriates earning in dirhams, the difference is substantial. A Dh5,000 transfer now converts to more than Rs131,000 at current exchange rates, significantly higher than levels seen at the start of the year.

The rupee has remained below the psychologically important Rs26-per-dirham threshold for years before breaching it in recent sessions.

Many UAE residents are also increasing transfers for property purchases, fixed deposits and equity investments in India while exchange rates remain favourable.

Analysts said multiple global and domestic pressures are driving the rupee lower. India is facing rising crude oil costs linked to the Middle East conflict, persistent foreign investor selling and broader global uncertainty.

“The whole system has been disturbed,” said Dilip Parmar of HDFC Securities, citing heavy foreign investor outflows, weaker growth prospects and elevated crude prices.

“That is the basic problem which you're seeing replicated in the fall of the rupee,” he said, adding that the decline was ultimately “a function of demand and supply” with dollar demand remaining higher.

According to Bank of America Securities estimates, India’s current account deficit could widen to more than 2 per cent of GDP this fiscal year, more than double last year’s level and potentially the widest since 2012-13.

Currency expert K N Dey said the speed of the rupee’s decline had surprised markets. “The speed of the rupee's descent since May 11 has caught the market off guard, yet both the regulator and North Block have remained notably silent,” Dey said.

He attributed much of the pressure to aggressive foreign institutional investor selling. Institutional investors have already withdrawn Rs2.65 lakh crore from Indian markets in 2026, close to last year’s total outflow of Rs3.04 lakh crore, according to Dey.

“This downward pressure is fuelled by aggressive FII capitulation,” he said.

India’s central bank has already intervened heavily to stabilise the currency, reportedly spending billions of dollars, tightening speculative trading activity and extending special credit lines to oil importers to ease dollar demand.

Prime Minister Narendra Modi has also urged voluntary austerity measures aimed at reducing dollar-intensive imports, including lower gold purchases and cuts in overseas travel.

Still, experts warned that the rupee may remain under sustained pressure in coming months. “With no bottom in sight, trying to forecast a stabilisation point is pure guesswork, and even a psychological slide to 100 is now on the table,” Dey said.

Ajay Suresh Kedia, Director at Kedia Advisory, said rising crude oil prices and strong dollar demand continued to weigh heavily on the currency. “The Indian Rupee remains under sustained pressure as the dollar index stays firm near 99 while rising crude oil prices continue inflating India's import bill,” Kedia said.

He added that higher energy costs had increased domestic dollar demand while elevated US bond yields strengthened the US currency globally. Kedia also cited persistent foreign investor outflows and concerns over a weaker monsoon outlook as additional factors hurting market sentiment.

“RBI intervention is helping contain volatility, but the broader trend still points toward weakness,” he said. Kedia expects the rupee to trade between 91.70 and 99.50 against the US dollar over the next six months, with depreciation pressure likely to continue amid global crude oil uncertainty.

Former UN Advisor and economist Santosh Mehrotra warned that the weakening rupee could have inflationary consequences for India.

“What has happened in the last three months is that the rupee has gone from under 90 rupees to nearly 96 to a dollar. Now this is going to have its own inflationary impact,” Mehrotra said. He added that the rupee could “very easily” touch Rs100 against the US dollar within a quarter if current pressures persist.

 - With inputs from Agencies