Stock - Indian Rupee
The rupee finally slips to 80, as oil prices make a renewed surge and setting off jitters in Indian financial markets. The Sensex dropped 100 points in early trades. Image Credit: Bloomberg

Dubai: The India rupee has dropped to 80 against the dollar for the first time after the currency market opened on Tuesday. In dirham-to-rupee terms, this works out to 21.78, and FX analysts say this could drop to 21.82/21.83 through the day.

All of which sets up the rupee closer to the next key level – 22 for one dirham. This could mean a more forceful entry into the market by Reserve Bank of India to try and stop the slide getting out of hand. In recent weeks, the central bank had made moves to allow more trade to be done in rupees and thus save up on dollars, but these have not yet yielded results.

“Now, it is more a question of when RBI will step in – India has the dollar reserves to arrest the slide for now,” said an FX analyst. “India’s foreign reserves are over $590 billion towards the end of June, and these do provide the cushion for the authorities to step in.”

The rupee’s depreciation since January 12 – when at 20.10 to dirham (73.81/$), it was at the strongest point this year – is at 8.38 per cent. “The pace of decline in the rupee value has increased since May 9, when it touched 21 for the first time,” said a senior treasury official at LuLu Exchange.

Remittance plans

UAE’s Indian expats will surely be hoping that the current levels will be maintained ahead of the next payday. Through the last three months, rupee remittance flows had soared as Indian expats made use of the rupee volatility.

There is also some in the currency exchange trade who say that remittances could be on the lower side because many Indian expats are on their summer breaks back home. “Many would have already exhausted available funds to remit because of other spending needs,’ said an official. “With their July paydays, the tendency would be to retain. Summer is typically a slower phase for remittances.”