Dubai: The Indian currency is expected to remain under pressure in the near-term amidst a combination of negative global cues, noted French multinational investment bank Societe General in a report, which will be regarded as a favourable trend for remitters in the UAE.
Against the UAE dirham, the value of the Indian rupee was at 21.62 on Friday, with forex analysts evaluating how the currency is expected to get weaker in the coming days. Check the latest forex rates here.
The Indian rupee is likely to struggle against the US dollar as slowing global growth and the world's largest economy's interest rate stance overshadows India's central bank intervention, Societe General suggested in a note on Friday.
Weakness in the Indian currency's value against the US dollar will be automatically reflected in its exchange rate with the UAE dirham as the UAE currency is pegged to the dollar.
RBI intervention may not help
"The Reserve Bank of India is likely to intervene at key levels such as 80," Kunal Kundu, economist at Societe Generale, wrote in the note.
"However, we believe that such interventions would provide opportunities to buy on dips, rather than establish sustained INR strength vs the US dollar," The rupee was trading at 79.88 per US dollar on Friday, barely changed from the previous session.
The rupee has been hovering just above the 80 levels in recent sessions on the back of expectations that the RBI will sell dollars to prevent the currency from falling below its record low of 80.0650.
The return of foreign portfolio flows to equity has kept the rupee pegged to the near-80 level. Foreign inflows into Indian equities hit nearly $6 billion so far in August.
Global growth cues to hurt INR
"We believe the global growth slowdown story could act as a headwind to positive equity inflow momentum," Kundu flagged.
In addition, a failure by the US Federal Reserve to pivot to a dovish stance and reinstate its objective to contain inflation, would reverse some of the recent momentum in equity portfolio inflows, he pointed out.
Meanwhile, Fed officials have kept a fairly hawkish tone following the softer-than-forecast U.S. July inflation data, in a bid to push back against expectations that it could cut rates later next year.
The market is currently pricing in near 60 per cent probability that the Fed will raise rates by 75 basis points for the third consecutive time next month. Fed Chair Jerome Powell's speech later in the day at Jackson Hole, Wyoming, will likely provide more cues on the rate hike path.