Dubai: Will the Indian rupee go below the 21 level to one dirham this time?
Early on Friday, the rupee is still hovering in the 20.74-20.76 range, while the official remittance rate is 20.58 to a dirham. Even on Thursday, the initial expectation was the rupee will remain under pressure, but by afternoon, there were signs of some stability. But this could be short-lived. (Check the latest currency exchange rates here)
“Everyone is watching whether it will breach 20.88 to the dirham, which is the lowest until now (and which was the level on April 20, 2020),” said Antony Jos, Managing Director at Joyalukkas Exchange. “There has been no sign from the Reserve Bank of India on what they plan to do – or whether they will do anything for now.”
UAE’s Indian expats are making full use of the 20.50 plus levels. Joyalukkas Exchange has been recording average daily remittance levels of Rs200 million plus to India in the last “seven- to eight days”.
Much the same is being repeated through other exchange houses and via bank remittances through accounts. Expat Indians are finding a comfort level at current rates and want to cash in before any firming up happens for the rupee. They are not waiting to find out whether the rupee will breach 21 to the dirham.
But will rupee firm up?
Short-term prospects seem to suggest it will not. Analysts reckon that the coming weeks will be about a strengthening dollar and which translates into weakness for the rupee and other emerging market currencies.
For a likely indication on how the rupee will fare short-term, keep checking the status on the Indian stock markets. The market corrected itself slightly on Thursday after foreign fund outflows over the previous days. It is those foreign fund outflows in dollars that trips up the rupee.
As of now, the Indian Government and banking regulator seem OK with the rupee at 20.50 plus – a weak rupee helps India’s exporters apart from lending a hand to NRIs sending in remittances.
The biggest worry though for India will be the oil import bills. Oil has been firming up, albeit in a narrow range. For the moment, UAE’s Indian expats need not worry about those details – the trend is for a softer rupee. If it ends up breaking the 21 to one dirham mark, it will set the tone for another remittance spike.
The early days of January will be interesting.