Dubai: The Indian rupee briefly plunged to about 24.8 versus the UAE dirham on Wednesday, as per rates aggregated by Google, before stabilising to 19.98 about an hour later. The momentary plunge sent UAE expats rushing to exchanges and banks for confirmation.
However, the Indian rupee was at 73.48 against the US dollar and no exchanges or banks reflected this plunge in rates. The prices fluctuated between Rs 23 to Rs 24.83 against one dirham, according to Google data, which reflects real-time exchange rate data provided by US-based financial services firm Morningstar.
Expats should check rates with local exchanges and/or banks before making any money transactions based on these rate fluctuations. Also, note that the Indian currency market trading hours are from 0900 Indian Standard Time (IST) to 1700 IST, indicating that trading had ended when the brief spike in rates were seen.
India's rupee to weaken this month
India’s rupee was expected to weaken this month after it strengthened considerably in August, tracking a stronger-than-usual US dollar. This drove the Indian rupee to be among the top performing currencies among other emerging Asian currencies, indicators showed.
Analysts had earlier forecasted how a weakening rupee in September would set a highly favourable trend for remittances from the country.
Analysts at Switzerland-based investment bank UBS noted earlier this month that the Indian currency is set to weaken to 77 per US dollar by the end of the year — more than 5 per cent weaker than current levels — and depreciate further to 79.5 by September 2022.
On the other hand, British bank HSBC expected the rupee to hold up “relatively well” in a stronger dollar environment as persistent FDI inflows and better foreign-exchange reserves will help the currency withstand external headwinds.
Why has India's rupee been gaining?
The gains in rupee, particularly in August, is the result of heavy buying in domestic equities and weakness in the greenback. Fresh foreign capital inflows into the Indian equity markets also bolstered the rupee.
The Indian rupee appreciated against the dollar last month as a slower US inflation rate elevated bets that the US Federal Reserve would keep its monetary policy accommodative slightly longer, a move that is tracked by central banks and market investors worldwide.
Indian rupee is likely to test 76-76.50 levels as a relatively strong greenback, rising crude prices and COVID-19 headwinds deepen the depreciation bias for the domestic currency, according to experts.
Experts are also of the view that the short term gains of the rupee against the dollar is not going to last long. On long-term trajectory, the Indian currency is likely to fall towards 75.50-76 level and could even test the 77-mark by year-end, breaching the year’s lowest point of Rs20.82 in mid-April.