NRIs will have to live with rupee at sub-20 a dirham level for now

Dubai: Indian expats in the UAE will have to make do with the rupee at 19.75-19.87 levels for now, with India’s central bank retaining interest rates at 4 per cent.

“The RBI did what was widely expected and maintain its accommodative stance on rates,” said a senior official with the treasury operations at LuLu Exchange. “We feel that in the near future - i.e., for a week - the rupee might not go below 72.75 and might test 72.35 on the other side, which translates to 19.76-19.98 against the dirham.”

The rupee had been gaining in recent weeks, so much so, many in the market was expecting the RBI to intervene and soften it somewhat. A softer rupee would work better from an export perspective... as well for NRIs wanting to send funds back home.

India's central had dropped the base rate by 115 points since February  2020.

Even after the February 1 Budget announcement, the rupee was trading in a tight band. Volatility was markedly absent. “Against the dirham, the rupee moved between 19.76-19.88 on February 1,” the spokesperson added.

Rupee’s passivity comes even as India’s stock markets kept pushing even further into record territory. The Sensex was at 50, 859 at 11.20am India time, up 245 points.

"In the short term, rupee is likely to be volatile as foreign portfolio investors press for sales in the stock markets to book profits," said Siddarth Razdan of Indianivesh Firstbridge, the fund manager."Plus, oil price increases could also play a dampener on the rupee. But for now, the overall dollar liquidity in the Indian system is comfortable.

"But one would expect rupee to strengthen once the  portfolio and FDI flows pick up again."