Dubai: When it comes to remitting money back home, Indian expats in the UAE need to be mindful of the fact that the rupee is expected to have a topsy-turvy week, but stay largely subdued due to the high costs of oil.
In light of this forecasted trend, the currency opened a tad stronger on Monday against the UAE dirham, from Rs20.18 to Rs20.16, but quickly weakened by over 10 paise to Rs20.27. Check the latest forex rates here.
So India-based forex analysts are currently evaluating how high crude oil prices along with a wider monthly trade deficit are expected to subdue the Indian rupee in the coming week.
Accordingly, the rupee is expected to seesaw between 74.50 to 75.59 against $1 or a greenback. Weakness in the rupee'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.
Oil costs to keep rupee weak
Lately, the Brent-indexed crude oil's price has hovered over $91 per barrel. The latest official data showed that India's trade deficit widened by 20.23 per cent on a year-on-year basis to $17.42 billion in January 2022 from $14.49 billion in the like period of 2021. It had widened to $15.30 billion in January 2020.
"Geo-politics shall guide the way forward. Trade deficit around $18 billion dollar per month shall also keep the rupee's strength in check. Inflation is also expected to be sticky with domestic fuel prices awaiting a big hike," said Sajal Gupta, head of forex and rates at India-based Edelweiss Securities.
Last week, rupee was weighed down against the US dollar following a rise in tensions between Russia and Ukraine. However, as the week came to an end, tensions between the two nations started to recede and the rupee appreciated sharply.
Why else will INR weaken?
Consequently, the rupee closed at 74.65 to a US dollar. Other factors such as corporate inflows and dovish statements from the US Fed aided the currency to gather some strength.
"Spot USD-INR has support at 74.30, the 200-day simple moving average, while resistance is at 75.21," said Devarsh Vakil, deputy head of retail research at India-based HDFC Securities.
According to Gaurang Somaiya, forex and bullion analyst at India-based Motilal Oswal Financial Services: "Next week, market participants will be awaiting for more clarity on the ongoing geopolitical tension and increased uncertainty during the weekend could trigger safe haven buying in the dollar and Japanese Yen.
"On the domestic front, foreign institutional investors (FIIs) have been on the sell side in the recent past and increased selling could restrict any major appreciation for the currency."
Somaiya added that momentum for the USD-INR would continue to trade sideways and it could quote in the range of 74.40 and 75.20.