UAE dirhams
Remittance flows to India had been running at quite a high this month, boosted by this week's drop of the rupee to a 12-month low. Image Credit: Shutterstock

Dubai: UAE’s Indian expats hoping for further gains from the rupee’s weakness will be disappointed – the Indian currency opened stronger on Thursday morning and moving away from the 12-month low it hit this week.

The rupee could trade between Rs20.42 to Rs20.56 to one dirham today, helped by stronger foreign fund inflows into India. (For the current remittance rate on one dirham, subtract 10 paisa from the inter-bank rate.)

“The rupee definitely has opened stronger and these levels should persist given that tomorrow (October 15) is a holiday in India,” said a top official at LuLu Exchange. “Plus, next Tuesday is also a holiday – on account of these holidays and the markets being closed, rupee might trade in a narrow range.”

It was on Tuesday (October 12) that the Indian currency hit a 12-month low against the dirham, at Rs20.59. Remittance levels from the UAE to India have been high since October, and the latest decline added to the flow.

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Will these levels hold?

Sources in local currency exchange houses would not be drawn into making forecasts as to what could be in store later in the month – “this is not astrology” said one – but pointed to other indicators. “In the event of a modest correction on the Indian stock market and weakness for other major currencies can push the rupee further above Rs20.58 to the dirham,” said a source.

“Otherwise, it might be in the range between Rs20.35 to Rs20.55 for a week from now.

Central bank – will it, won’t it?

Industry sources however are near unanimous that it is unlikely that India’s central bank will make any strong intervention to stabilize the currency at this moment. “The current softness of the rupee is favourable for India’s exporters – the rupee needs to drop to below Rs75.60 to the dollar for anything like that to happen,” said a source.