The Indian rupee recorded its second-biggest gain in a single day since 2003, surging by more than 2 per cent on Friday and by another 1 per cent on Saturday to settle at Rs15.14 against the UAE dirham, up from Rs15.58 vs. Dh1 on Thursday.
The rupee rose by Rs1.19 against the US dollar on Friday, and by another Rs0.52 on Saturday, bringing the total gains against the US dollar to Rs1.71 over the weekend, amounting to a surge of 3 per cent.
The previous two biggest single-day gains against the US dollar since 2003 were Rs1.24 rise on September 22, 2011, and before that, a Rs1.19 jump on November 12, 2008.
The gains in the rupee came after the country saw massive inflows of foreign capital over the weekend owing to clarifications issued by the government on tax-avoidance rules. This was supplemented by reduced uncertainty in the Euro Zone following to unexpected steps unveiled by the European Union to support the region’s financial system.
With foreign institutional investors pumping about Dh1.9 billion ($527 million) in Indian equities on Friday, the huge dollar supply buoyed the rupee.
The foreign exchange as well as the stock markets rallied on hopes that the Indian financial giant would finally come out of its slumber and long-stalled economic reforms will be jumpstarted after Prime Minister Manmohan Singh, who has now taken over additional charge of the Finance Ministry, asked officials to chart a revival in the economy and perk up investor confidence.
On Friday, the Finance Ministry announced the draft guidelines on the much-feared General Anti-Tax Avoidance Rules (GAAR), offering clarity to foreign investors. The Indian rupee, tracking robust stock market opening, immediately began strengthening following the improved sentiment.
Indian expats in the UAE, most of who were waiting for their June salaries to be credited, were caught off-guard when they went to remit their dirhams over the weekend, when the rate they received turned out to be much below their expectations.
“I checked the rate on Wednesday evening, and I was offered Rs15.45,” said Pratap Singh, who works for a local retailer in Dubai. I got my salary on Thursday, and went to remit money on Friday afternoon, only to find that the rate had dropped to Rs15,” he complained.
“I thought this exchange was trying to short-change me; so I checked with two others but found the rate disappointingly low at all of them,” he said. “Maybe I should have sent the money earlier,” he said.
There are many others like him who were in for a rude shock while remitting money this time around. For those who are yet to remit funds this month, the sooner the better is what experts are advising. Going ahead, the rupee can pull back to 54.50 levels against the US dollar (Rs14.84 vs. Dh1) in the coming weeks, said Hemal Doshi, Currency Strategist, Geojit Comtrade.
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