Indian rupee back below 55

After a week of growing muscles, the Indian rupee once again slumped below the 55-mark against the US dollar, and the 15-mark against the UAE dirham, much to the relief of Indian expats across the world, some of who are still waiting to remit their monthly instalments in the hope of a ‘better’ exchange rate.

“I just couldn’t help feeling left behind when my Indian friends kept telling me how they made a killing by remitting money at as low as Rs15.25 against the UAE dirham,” says Sukesh Rajput, store manager at a Dubai-based retailer.

“I kept waiting to add one more month’s remittance to the kitty and send a lump sum at this rate,” he said, adding that he was disappointed when what he calls the ‘dream-run’ seemed to have ended last week as the dollar – and with it the UAE dirham – came crashing down against the Indian rupee.

However, with the Indian rupee trading at Rs15 at 11am UAE time this morning, a number of Indian expats like Rajput intend to stop taking their chances and remit money while the rate is still good.

Non-Resident Indians (NRIs) have had a good run with the exchange rate this year, with a constantly weaker rupee making their remittances that much sweeter.

However, when Indian Prime Minister Manmohan Singh took over the reins of the Finance Ministry last week, he made sure he did with a bang and announced some much-needed concrete steps to clarify taxation limits on foreign companies.

This resulted in an almost instant flow of overseas funds into the Indian economy, prompting a reversal in the beleaguered rupee’s direction.

Nevertheless, while investors await further announcements from the Indian government to fully signal an end to the policy paralysis that has been plaguing it, fresh dollar demand is once again eating into the rupee’s gains.

Analysts now believe that the rupee, after being hammered for the better part of last year and the first half this year, can make a recovery provided the Indian government follows up the recent announcements with more active reforms to bridge its ballooning fiscal and trade deficits.

“The RBI’s measures create scope for additional foreign inflows to come into India, which will materialise if the domestic policy environment and the risk appetite of foreign investors improve,” said a recent report by Crisil, an Indian ratings agency.

“We assign a relatively higher probability to rupee settling at around 50/USD by March-end 2013,” the agency said in its report.

(Image courtesy Shutterstock)

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