Cash-rich NRIs flinch as rupee hits 10-week high
Hoping for a continuation of a favourable exchange rate, many Indian expatriates have been caught at the wrong end of the remittance game, with the rupee gaining back most of its losses of the past two months.
The rupee, which closed at a record low of Rs14.62 against the UAE dirham on December 15, 2011, is currently trading at Rs13.60 versus AED1, or down about 7 per cent within the span of a month or so.
“I switched jobs in November and have just received my end-of-term benefits from my previous employer,” said Raghunath Shreshtha, an IT manager with a Dubai-based firm. “With the rupee scaling 14.50 and more against the dirham [in December], I was hoping to send home the entire amount in order to part-prepay my mortgage there,” he said.
“With the amount I was hoping to remit [in tens of thousands of dirhams is all he will say], I have a notional loss of thousands of Indian rupees,” he shrugs, and says is willing to wait for a return of last month’s exchange rate.
The rupee is back to where it was in mid-November. Traders are forecasting the rupee to hover around the current Rs50 to 1 US dollar-mark in the very short term, and to move in a band of Rs49.90 to Rs50.30 against the dollar this week.
According to HDFC Securities analyst Subash Gangadharan, the rupee is in for a further consolidation against the US dollar (and therefore the UAE dirham) in the coming few weeks.
“On a weekly perspective, the USD/INR pair has corrected for the third consecutive week. With the pair in an intermediate downtrend…we expect the USD/INR pair to move down further in the intermediate term. While short-term bounce backs can be expected, we expect the pair to move towards the next major lows of 48.9-48.59 in the coming weeks,” he wrote in his latest weekly currency report.
That level, of Rs48.59 against $1, would suggest that the rupee would be trading at around the Rs13.25-mark against the UAE dirham, leading to more angst for the UAE’s Indian expatriates.
Local exchange houses, true to their business, aren’t commenting on the future direction of the rupee, only saying that remittances by Indian expatriates have slowed down a tad this month after the huge swell seen in December.
“A majority of remittances are time-bound, sent by expats to maintain their families back home or to service existing debt,” said the branch manager of a local remittance company who did not wish to be named as he isn’t authorized to speak to media.
“There was indeed a rush last month, as it is always when the exchange rate becomes favourable, but like always, the rush dies down when the fluctuating currencies find their current equilibrium,” he said, playing down the recent lull.
Adding fuel to the fire is today’s unexpected decision by the Indian central bank, the Reserve Bank of India (RBI), to cut the amount of deposits lenders need to set aside as reserves for the first time since 2009, signaling future interest-rate cuts.
The RBI reduced the cash reserve ratio to 5.5 per cent from the earlier 6 per cent – a move that would add around Rs320 billion into commercial banks. The RBI however left the benchmark repurchase rate untouched at 8.5 per cent for the second consecutive month.
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