With rupee weak, what Indian expats in UAE can do ahead of next remittance

Dubai: For UAE’s Indian expats, the rupee to dirham exchange rate remains extremely favorable as the end of month remittance activity comes into sight. The INR is at 23.51 to a dirham, slightly lower than the all-time low of 23.59 from January 14.

In the first 20 days of January, the rupee has slid 1.1%, which is quite unprecedented.

Yet, those Indian expats with remittance plans need to keep a close eye on a couple of details – on February 1, India will be announcing its latest federal budget, and it could be that the government might make some moves to halt or at least slow down the rate at which the rupee has gotten weaker.

And the INR sure has been getting weaker: Since November 5, when Donald Trump was confirmed as having won the US Presidential election, the rupee dipped from 84.95 to a dollar to the lowest ever point of 86.64. That’s a depreciation by a staggering 2.91% in the space of just over 60 days.

Compare this with the 3.05% decline in the rupee value in the whole of 2023, while that in 2024 was by 3.6%.

“Since Sanjay Malhotra became the Governor at Reserve Bank of India, the rupee has become more volatile,” said Arun John, Chief Market Analyst at Century Financial. “Under him, the RBI is trying to guide the rupee to a market-determined exchange rate, which is a contrast to the policy of stability pursued under the previous governor Shaktikanta Das.

This is what’s showing up with the wild ride the rupee has had in recent days. And adding up to a bonanza for Indian expats in the UAE and Gulf. (This is where the dirham’s dollar peg also works to the advantage of sending remittances to India.)  

Multiple remittance platforms are helping remitters, offering limited-time offers of 'no additional fees' in the coming days.

But allowing the INR to be decided by market forces is tricky. Projections for the India economy’s growth has been revised down, and foreign institutional investors had been pulling out funds in recent weeks. Any bad news on the economy or if the February 1 budget disappoints investors could make for an extremely volatile phase, especially for the INR.

“The Budget 2025-26 could include measures to indirectly shore up the rupee by addressing structural and fiscal factors,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services.  

“Likely steps could involve incentivizing foreign investments, boosting exports through production-linked incentive (PLI) schemes, etc. Additionally, steps to reduce the current account deficit, such as lowering non-essential imports or promoting domestic manufacturing, might also feature.”

Another factor has also come into play. The coming days will see whether President Donald Trump will be hiking trade tariffs, whether selectively or across the board, and what that would mean for the dollar.

"It's not just the INR that's feeling the dollar power," said Neelesh Gopalan, senior FX analyst at a fintech. "The British pound to USD dropped to around 1.2850 immediately after the November 5 US election . It touched 1.2497 on December 19, 2024, marking the second lowest rate of last year." (The lowest point for GBP-USD was on April 22, 2024, at 1.2351.)

When it comes to INR-AED, "In December, UAE saw good volumes in India-bound remittances. The rupee ranged between 23.10 and 23.25 for most of the days."