The beleaguered Indian rupee made fresh lifetime lows on Tuesday against the US dollar – and the dollar-linked UAE dirham – even as the market ignored suspected intervention by the country’s central bank to stem the rot in its currency.
The rupee traded at Rs14.70 for Dh1 at 7.10am UAE time (3.10am GMT), Tuesday, as risk-averse global investors dumped the rupee while dollar demand from local oil importers in the country led the rupee to its current dismal standing against global currencies.
Against the US dollar, the rupee made fresh lows of Rs53.99 for $1 even as traders suggested the Reserve Bank of India (RBI) dumped dollars in the market yesterday at levels close to 53.90 in a bid to prop up the struggling rupee.
However, the move managed to buoy the rupee only briefly for just about an hour-and-a-half on Monday, starting 1pm UAE time (9am GMT) until 2.40pm UAE time (10.40am GMT), after which the currency dipped to a fresh nadir.
In what seems to be desperate attempt to arrest the decline, the RBI last week instructed the country’s exporters and other foreign exchange earners to convert half of their dollar deposits in banks into rupees.
In a note on the Indian currency, research agency Capital Economics maintains that RBI intervention is pointless, and that the apex bank “would be better off simply allowing the currency to depreciate further.”
Importantly, the factors affecting the rupee – dried up global capital flows into the country’s slowing economic engine, risk-aversion amongst foreign investors, a deepening euro zone crisis, and India’s own fundamental economic weakness – are too strong for RBI’s fiscal tampering to have any sustainable impact.
In such a scenario, the rupee may continue to see fresh lows, much to the liking of its 30 million strong non-resident Indians (NRIs) and PIOs (persons of Indian origin) across the world.
The UAE has an estimated Indian population of about 1.4 million, a majority of whom remit money home on a monthly basis and have substantial investments ‘back home’ in the way of real estate assets.
The rupee is today fetching upwards of Rs14.55 against Dh1 on the UAE’s numerous currency exchanges, with bulk remittances of over Dh10,000 attracting an even more favourable rate.
The recent weakness in the rupee is being pegged by a number of experts as a golden opportunity for those NRIs with long-standing loans and/or mortgages in India to borrow cheap in their country of residence and pay up the balance, taking advantage of the most favourable exchange rate ever.