Falling rupee brings relief to expats

The steep fall in the value of the rupee against the dollar has come as a relief to Indian expatriates who have suffered a long period of unfavourable exchange rates.

Indians living in the UAE are now able to send home more rupees with their dollar-pegged dirhams.

On Tuesday, the exchange rate hit a record low of Rs12.54 to the dirham – a huge difference from the rate that prevailed a year ago. The huge outflow of foreign institutional investors' funds from the Indian stock market and heavy dollar demand caused the steepest intra-day fall of the rupee in a decade.

Pakistan's currency has also been weakening against the dollar due to high import payments and reduced inflows of foreign funds.

There was a slight upturn yesterday after the Reserve Bank of India sold dollars in the foreign exchange market to support the rupee and assist the partial recovery of the Asian stock markets. In early trading the Indian currency appreciated by Rs0.6 against the greenback to reach Rs46.28 per dollar. However, market participants expect the rupee's downward trend to resume.

Money exchange houses said Indian expatriates were among the biggest beneficiaries of the strengthening of the dollar. Remittances to Asian countries such as India, Pakistan, Sri Lanka, the Philippines, Bangladesh and Nepal are traditionally high during Ramadan.

"The rate is very low today and you will get Rs1,000 for just Dh78.9," said G Subramaniam, Assistant General-Manager of City Exchange, the money exchange arm of the State Bank of Travancore. "The market expects the Indian rupee to go down further. It comes as a great boon to the non-resident Indian [NRI] community here.

"Banks, financial institutions and others are buying dollars in large quantities and the pressure on the Indian rupee is unprecedented. Unfortunately the favourable exchange rate has come at a time when most salaried expatriates have already sent money for Onam, Ramadan and other requirements. The exchange rate for Rs1,000 on Tuesday was Dh79.54 compared to Dh92.5 almost a year ago. Most NRIs who have remitted money to India for real estate have not waited for the rupee depreciation. If the rupee goes down further it will be good for remittances after the next salary payment."

He said middle-class NRIs had been unable to send money home due to the escalating cost of living in the UAE but the exchange rate switch meant they would be able to remit cash once more.

Sudhir Shetty, General-Manager of UAE Exchange, said: "In the past 18 months the rupee-dollar exchange rate has touched an all-time high of Rs39.8 and at the current rate of Rs46.28 we are seeing a total reversal of the long prevailing trend."

He said Indian importers had started purchasing dollars to cover their oil import requirements because the oil price had fallen below $100 per barrel.

"The Indian and global stock market crash also precipitated the rupee's fall because a lot of fund invested in the local and international stock markets could not be withdrawn to cover dollar requirements. Dollar demand has gone up while the supply has dried up."

The Pakistani rupee has lost 19.6 per cent against the dollar this year and foreign currency reserves have fallen sharply because of a deteriorating balance-of-payments position. In terms of remittances from the UAE, Pakistanis and Bangladeshis are the two largest expat communities.

"Their remittances are normally high during Ramadan and the strengthening of the dollar could have increased their purchasing power," said Shetty.

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