Rupee at 1-month low: Rs17 vs Dh1 in sight again

Continuing its slide for a third day, the Indian rupee fell to a one-month low on Wednesday morning as the country’s oil importers continue to buy US dollars to foot upcoming import bills.

The rupee hit a 3-month high of Rs16.68 vs the UAE dirham late last month, on January 29, and is up about 2 per cent since then, hitting Rs16.98 vs Dh1 in early trade this morning.

According to analysts, sustained dollar demand by importers to pay off the upcoming monthly oil import bill is the primary reason for the recent move, even as some are reckoning that the US dollar could further strengthen today owing to the uncertainty over a new Greek debt deal, which may push the euro further down.

In addition, China yesterday announced a drop in inflation to 0.8 per cent, a five-year-low, sparking fears of a deflationary spiral in what has so far been one of the world’s robust big economic engines over several years.

With regard to the Indian rupee, “foreign flows will remain a key factor in the near-term for markets. Technically, the USDINR pair is now in an uptrend and could target the 62.7 levels in the coming week,” said Subhash Gangadharan, analyst, HDFC Securities.

That would translate into the rupee breaching the Rs17 vs Dh1 mark this week.

Fluctuations in the exchange rate do matter to expatriates in the UAE and elsewhere since a favourable rate (weakness in currency of destination) means that they are able to remit more money back home, or simply more savings and investments in their home country currency.

According to Promoth Manghat, Deputy CEO of the Abu Dhabi-based UAE Exchange, one of the world’s largest remittance companies, the Indian rupee is a depreciating currency and has been losing value since many years.

“Historically, the Indian rupee has been a depreciating currency, declining by between 6 and 7 per cent every year,” he told Emirates 24|7 in an earlier interview.

The UAE remittance corridor to the Indian subcontinent is one of the world’s busiest remittance corridors.

According to World Bank, there were more than 14 million people born in India living abroad in 2013 (estimated to be the largest emigrant stock in the world). India is expected to have earned $71 billion from overseas remittances in 2014.

World Bank estimates other countries that received large remittances in 2014 include China ($64 billion), the Philippines ($28 billion), Mexico ($24 billion), Nigeria ($21 billion), and Egypt ($18 billion).

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