Rupee: Why Indian expats are rushing to send their money home

Dubai: The Indian rupee is still firmly locked in at close to 23.5 against the dirham, with Indian expats in the UAE starting to hit the ‘remit’ button on their apps right through the last two days. The rupee had started the week at 23.34 levels.

It was always certain that the INR softening back to 23.5 levels would trigger a spike in rupee remittance volumes from the UAE to India. Even though, June remittance levels tend to be historically low because many Indian expats in the UAE would typically have additional expenses such as airline ticket booking for summer breaks and all the related expenses when they back in the home country.

Unlike in the past, NRIs are not waiting to see if next week brings more drops for the INR. Instead, the sentiment is have cash, will send now.

“Last Thursday (June 19) was one of the bets in recent weeks for AED-INR remittances,” said a currency exchange house official. “There was some concern yesterday when the rupee strengthened – but it was only a slight one from 23.5 to 23.46.”

Also, there is a sentiment that the rupee might go back to 23.3/23.4 levels by end of the month. "Wherever spare funds are available, Indian expats in the UAE and Gulf have been sending money home since Thursday," said a senior official at a currency exchange house. "If the levels stay the same - or even drops further - by July, that's a double win for them."

Today and right through to Monday, the industry expects more INR-linked remittances. But does it make sense to wait for better exchange rates next week?

Industry sources are not so certain. The major reason is the dollar continues to show weakness even with a full-scale Israel-Iran war going on. In the past, any geopolitical event would have seen investors rush into the dollar as a safe haven to hold on to. (These days, it’s only gold that’s living up to the safe haven status.)

Will these factors drive the Rupee in coming months?

 ● Recovery in FII (foreign institutional investor) inflows post withdrawal of reciprocal tariffs by the US and positive trade deals by the US with other countries.

● Expected increase in India's defense production is leading to increases in exports and a reduction in import dependency, which shall have a positive impact on the trade deficit and current account deficit.

● India’s optimistic growth outlook post India-UK trade deal along with growing optimism over US-India trade deal

● Easing Inflation below RBI’s target of 4% leading to more room for rate cuts by RBI.

● RBI’s intervention to contain excessive volatility.

- Subramanian Sharma, Promoter Director, Greenback Advisory Services.