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Customers at Lulu Exchange in Sharjah. Is it time to remit money back home again? Image Credit: Ahmed Ramzan/Gulf News

Dubai: The Indian rupee continued to stay weak this week, with the currency's depreciation seen impacting the economy and various segments such as fuel prices, while pushing up inflation.

Against the UAE dirham, the value of the Indian rupee was at 21.19 for a second straight day on Friday. The last time the currency hit the current low was on May 22 at 21.19. Check the latest forex rates here.

The Indian rupee held steady at 21.15 to the dirham early on Wednesday (June 8) after the Reserve Bank of India raised interest rate by 0.5 per cent. This is the second hike by the central bank since May. Read more here.

The Indian rupee hit a record low against the US dollar on Thursday as the relentless surge in global crude oil prices raised concerns of a sustained rise in imported inflation, while weakness in domestic shares also hurt.

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.

The partially convertible rupee was trading at 77.78/79 per dollar after touching a record low of 77.81. The previous life low of 77.7975 was touched on May 17.

Indian rupee
Since the Russia-Ukraine conflict began in late February, the rupee has depreciated about 4 per cent.

Why is the Indian rupee falling?

Since the Russia-Ukraine conflict began in late February, the rupee has depreciated about 4 per cent cent while currencies in other emerging markets have depreciated 4 per cent to 7 per cent.

The rupee has been hitting fresh all-time lows of late due to a rise in the US dollar index and concerns around global economic growth. Analysts are currently of the opinion that the weak economic data around the world, particularly in China, has put pressure on the US dollar index, which hit a nearly two-decade high.

Market participants fear that tightening of monetary policy across major countries in globe to combat high inflation, may prompt foreign investors to pump out liquidity from emerging markets.

Currently there is an outflow of funds as investors move funds to high-yielding investment instruments. The analysts further evaluate how the Indian rupee is seen depreciating this week on strong US dollar and elevated crude oil prices.

USD-INR spot exchange rate is expected to trade above 77.75 in the days ahead, noted Dubai-based forex analysts. Indian shares were trading slightly lower but foreign investors have remained net sellers of equities in recent months.

Oil prices held firm near 13-week highs on Thursday after China reported stronger-than-expected exports in May, although new Shanghai lockdown restrictions capped gains.