Indian rupee hits 5-week high; surges to Rs17.85 against Dh1

Aggressive policy measures recently undertaken by the Reserve Bank of India (RBI) have resulted in the Indian rupee clawing back some of the losses that it incurred in previous months, which at the time offered a bumper remittance rate for Indian expats in the UAE and elsewhere.

On August 24, 2015, the Indian rupee traded at a 24-month low of Rs18.24 against one UAE dirham, offering a window of opportunity to remit record sums of money back home at a favourable exchange rate.

In the past few days, however, that window seems to be closing fast, with the rupee surging by more than 2 per cent from the level reached in late August.

The strong rally seen in the rupee is a result of Indian exporters and banks stepping up dollar sales amid aggressive policy measures from the RBI.

Earlier this week, the RBI slashed the repo rate by 50 basis points to 6.75 per cent from 7.25 per cent, and announced a roadmap to increase foreign investment in sovereign securities.

This happened in the backdrop of the US Fed delaying a rate hike in the US dollar, resulting in a reversing of positions that some financial institutions took in anticipation of a September rate hike.

In addition, the Indian apex bank also outlined a phased plan to increase government bond limits for foreign portfolio investment limit.

This along with the 50 basis points rate-cut announced by the RBI is seen by economists as having the desired effect, which is stimulating the rupee in the short term and boosting economic growth in the medium term.

While economists expected a cut of 25 basis points, the RBI went with double that amount.

To ensure that the results trickle down faster to the grassroots, the RBI said it will work with the government to see that banks implement the monitory policy without too much lag so end-customers can benefit from it.

(Image via Shutterstock)

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