Indian rupee @ 15.11 against dirham

Indian expatriates in the UAE and across most of the Gulf region are a happy lot as the rupee fell to its weakest level in six months this morning, falling below the psychological Rs15-mark against Dh1 for only the second time this year.

The rupee, which plunged about 22 per cent over the previous two years (2011 and 2012), has not seen much of a movement this year, starting the year at Rs14.96 against the UAE dirham and remaining within a band of Rs15.03 and Rs14.46 versus the dirham during the first four months of 2013.

However, the month of May has seen it decisively cross that Rs15-mark against the dirham, to touch Rs15.10 intra-day yesterday, and closing at Rs15.08 against the UAE dirham.

This morning, continuing its slide from yesterday, the rupee was trading at Rs15.11 against the UAE dirham (Rs55.54 against the US dollar) at 10.15am UAE time (6.15 GMT) on May 22, 2013. Last evening, expatriates in Dubai were seen cashing in on the weak Indian rupee, remitting their cash at the most favourable rate in six months.

The UAE Exchange said in a statement yesterday that it helped remit Dh25.34 billion ($6.9 billion) to India last year, when India is estimated to have received $69 billion in remittances. 

Promoth Manghat, Vice-President, Global Operations, UAE Exchange, said in a media statement that "[n]on-resident external deposits in India went up to 9.2 per cent in recent months, driven by an 18 per cent decline in the value of Indian rupee that helped drive remittance into India, while attractive interest rate on external deposits did the rest." 

He highlighted that the GCC corridor of the exchange was responsible for a lion's share of its remittances in 2012, accounting for Dh21.3 billion ($5.8 billion) in remittances last year. The exchange says that it expects to increase that figure by up to 10 per cent this year. 

"India is an important market for us. Last year we remitted over $ 5.8 billion only through our GCC corridor to India. We plan to increase our remittance inflows to India in the coming year by 8 to 10 per cent," said Manghat.

Analysts maintain that the rupee lost ground yesterday and over the past week or so on sustained dollar demand from importers, and add that if equities continue to remain sluggish, as they were yesterday, the rupee rout could continue for another couple of days.

“The Indian rupee weakened further during the week gone by as the dollar’s strength against global currencies and demand from oil and gold importers offset gains in domestic shares that have been driven by strong foreign flows,” Subash Gangadharan, analyst with HDFC Securities, the investment brokerage arm of HDFC Bank, wrote in his weekly currency update published on May 20, 2013.

“Concerns over the wide current account deficit too have been weighing on the rupee,” Gangadharan highlighted, pointing out that the rupee had declined 0.13 per cent against the US dollar (and other dollar-linked currencies such as the UAE dirham) in the week ended May 17, 2013.

In fact, the rupee has weakened against the US dollar and the dollar-denominated UAE dirham (as well as other USD-linked Gulf currencies) for three consecutive weeks this month, declining by about 3.3 per cent in 21 days of May so far.

The rupee last saw lower levels than these about six months ago, when it made a low of Rs15.16 against the UAE dirham on November 29, 2012. Before that, the Indian rupee made its famous lifetime low of Rs15.55 against the UAE dirham on June 23, 2012, but within three-and-a-half months, made a remarkable recovery to Rs14.08 on October 5, 2012.

Since then, of course, it has lost ground and fallen by 7.2 per cent in less than eight months.

HDFC Securities’ Gangadharan maintains that despite holding its own during the first few months of this year, the rupee could see a pummelling during the remainder of 2013.

“It is a dollar story this year as the US labour and housing markets appear to be recovering. And while we do expect the Fed to be cautious in withdrawing stimulus, the economic recovery should drive the dollar higher,” he wrote in his latest weekly currency report.

“Coming to the Indian markets, while foreign fund inflows have been supporting the rupee, the rupee is likely to remain under pressure given the increase in imports, especially gold and the upward movement in the global crude oil prices,” he said.

“Technically, the USD/INR pair remains in an uptrend after bouncing from the strong supports of 53.6. We expect the pair to move up further this week,” he said.

Follow Emirates 24|7 on Google News.