Rupee gives up gains; NRIs smile

The Indian rupee failed to retain initial gains today against the US dollar – and, therefore, the UAE dirham – and slipped about 0.75 per cent to Rs15.20 vs. Dh1 this morning as fresh demand for dollars saw banks and importers dump the rupee in the forex market.

Earlier, the rupee made a miraculous resurgence when it gained about 3 per cent over the weekend on reduced Euro Zone uncertainty and after the Indian government issued clarifications on tax-avoidance rules.

With foreign institutional investors pumping about Dh1.9 billion ($527 million) in Indian equities on Friday alone, the huge dollar supply buoyed the rupee.

However, the dollar seems to be once again strengthening against the euro as market participants wait for more details on the EU banks rescue package.

Indian expats in the UAE, who were caught off-guard by the sudden strength in the rupee at the beginning of this month, are expected to now cash in and dispatch their monthly remittances while the exchange rate remains favourable.

“I’ll take anything above 15,” said an Indian expat who remitted his dirhams today from one of Dubai’s currency exchange houses. “I was offered [Rs]14.97 [vs. Dh1] yesterday – glad I waited until today,” he added.

Expert opinion remains split on whether the beleaguered rupee has already turned a corner or will it continue its journey south after a brief respite.

Some analysts believe that the foreign exchange market and Indian equities will continue to rally now that Prime Minister Manmohan Singh has taken over additional charge of the Finance Ministry and asked officials to chart a revival in the economy, which should perk up investor confidence.

However, still others believe that Singh will have to carry on announcing major reforms for international investors to really return in the numbers required to keep the Indian economy on a healthy growth path. With a fragmented mandate at the centre and with general elections due in 2014, a section of experts believe that Singh has a very stressful couple of years ahead of him.

(Image courtesy Shutterstock)

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