NRIs beware: Best time to remit cash ending?

The Indian expatriate community in the UAE – and elsewhere around the world – has been enjoying some of the most favourable exchange rates for their dirhams, dinars and dollars in the recent few weeks.

However, as with all good things, it may be time to bid adieu to the windfall gains made from remitting money back home as the rupee seems to have reversed its course in the past couple of days thanks to some solid financial jugglery by the Indian authorities.

India’s foreign exchange reserves dwindled sharply in the past three weeks, declining by a whopping $5.35 billion (Dh19.65bn) as its central bank continues to sell dollars in a bid to stem the country’s sinking currency.

The Indian rupee made seven successive lifetime lows in as many sessions until Thursday, when a decision to steeply hike petrol prices in the country seemed to have stabilised it a little bit.

According to data made public by the Reserve Bank of India (RBI), India’s foreign exchange reserves fell by $1.80bn for the week ended May 18, after falling by $1.37bn and $2.18bn in the previous two weeks, largely on the back of suspected sale of dollars by the RBI to salvage the rupee.

The rupee has declined by 7.44 per cent in the past one month, and by a massive 27.9 per cent since peaking at Rs11.99 versus the UAE dirham on August 2, 2011, less than ten months ago. The rupee was among the worst performing emerging market currencies in 2011, and has shown all signs of further deterioration this year.

Analysts are now saying that the rupee may have already bottomed out, at least for the short term, and maintain that last Thursday’s lifetime low of 56.35 that the rupee recorded against the US dollar (Rs15.34 vs. the UAE dirham) may not be breached in the forthcoming weeks.

According to HDFC Securities’ weekly currency perspective, the rupee will face resistance between 56.08 and 56.38 levels (against the dollar) this week.

One reason that the rupee continued its downward journey in recent weeks was the authorities’ perceived helplessness in doing anything to support it. The RBI and India’s Finance Ministry made no ostensible effort or policy changes to show their seriousness about trying to prop up their currency, with traders and foreign investors seeing that as virtual abandonment of the currency by the authorities, and therefore shorting the rupee, thus compounding its downfall.

However, recent moves like hiking the petrol prices by the government and the sale of dollars by the RBI at least show intent by Indian authorities to do something about the rut. While this in itself may not be enough, the fact that the rupee has already depreciated by more than a quarter in less than 10 months, and that the Indian economy is still growing, albeit slower than before, may help support the rupee at current levels.

If that turns out to be true, then for the Indian expats all across the globe, the best time to remit money was yesterday.

[Image via Shutterstock]

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