Dubai: The Indian rupee dropped further early Friday, at a never before seen 22 plus to the dirham, setting up another solid round of remittance possibilities for Indian expats in the UAE.
The INR is currently showing 22.06, or 81.02 against the dollar. It did seem in the initial minutes of the currency market opening that the rupee would drop to 80.20 levels. But there is some settling at the 81.08 mark.
Incidentally, by around 9.45 UAE time, the rupee was back under 81, suggesting that the Indian central bank was getting active and doing its best to prop up the INR. The rupee, at 3pm, is now back past 81 after hitting 81.24 earlier in the day.
“For UAE’s India expats, 22 to the dirham is the magic figure and that’s where we are right now,” said Neelesh Gopalan, FX analyst at a Dubai-based fintech. "It might take longer for the figure to be reflected in the actual exchange rates - but we cannot rule out that possibility."
The overnight exchange rate shows a dirham fetching 21.87 and that could be in for a revision shortly. "September 22 was unlikely anything for the rupee - the previous night's closing was 79.88 to $ and from there to 80.86 in 24 hours," said the FX analyst. "Today, if there are no interventions, we could see the drop to 81.30 levels."
The INR dropped below 21 as recently as in May, which puts the speed of the fall to 22 in perspective.
How long will INR drops continue?
According to Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services in Sharjah, “My expectation is that the RBI (Reserve Bank of India) will wait awhile before making a more forceful statement on stopping the decline. The global market situation since Wednesday’s US Fed rate decision is laced with uncertainty.
“RBI could try to see out this volatility before trying to stabilise the rupee. Plus, India too is likely to have a rate hike as soon as October, and that should set a floor under the rupee’s fall.”
Once the 81 mark is breached, it "shall push the INR towards 81.20 levels and a whole new levels) in the next few days," Heena Naik, Research Analyst - Currency, Angel One Ltd. "It remains quite important to see what action RBI takes from here on."
A clear window up to Monday?
If the RBI does stay on the side-lines today – and not use its dollar reserves to bolster the rupee - the UAE’s Indian expats can make full use of the historic low to their advantage. It would be a clear run all the way up to Monday next.
As expected, customers made use of the currency fall, especially businessmen and investors. We witnessed a 50% increase in remittance volume to India yesterday. The weekend window is also expected to add to the remittance volume to the Indian corridor.