Dubai: The Indian rupee is treading lower at 21.68 to the dirham early Thursday (August 18) and within striking distance of the lowest point so far this month of 21.73. The INR closed at 21.62 on Wednesday.
If the pattern of weakness holds, this could be an ideal window for remittances by Indian expats in the UAE. Remittance volumes had been low through the week so far; for one being mid-month and also because the Indian markets were closed on August 15 (Independence Day) and 16 (Parsi New Year).
“The rupee had not seen any major correction for some weeks now,” said a senior treasury analyst. “So, today’s drop is slightly beyond the typical trading patterns we have been seeing. Anything close to 21.70 levels should constitute as favourable for remitters.”
The lowest point for the rupee to date has been 21.79, which was during mid-July. (It was on May 9 that rupee slipped below 21 for the first time.)
"Next month will see heavy remittances, given that key festivals - such as Onam - will be going on in some of the states," said the analyst. "So, ideally anything in the 21.70 and over range will come in handy for expats."
Today’s drop has to do with the mixed messaging from the US, where the latest Federal Reserve minutes suggest uncertainty over the pace of further interest rate hikes to tackle soaring inflation. The Indian stock markets started the day in the red, with the main Sensex lower by nearly 200 points. It has since reversed course somewhat and is currently – at 8.30 GST – down by 104.
“The Indian rupee had been fairly stable in August, even with the central bank raising interest rates by 0.50 per cent to pre-pandemic levels of 5.40 per cent on August 5,” said an FX broker. “Today’s dip has to do with the lack of clarity on what next from the Fed. But I personally don’t think this will lead to drops in the 21.75 range.”
The highest point for the rupee this month was 21.39 on August 2.