Indian expats working in the UAE and around the world are waiting for their salaries to take advantage of one of the best ever exchange rates on offer.
The Indian rupee made fresh 29-month lows this morning, sinking to Rs18.57 vs Dh1 (Rs68.20 against $1), and the plunge coincides with month-end dollar demand for Indian importers of oil and other goods.
“I got my salary yesterday evening, and will be remitting today,” said Saurabh, a Dubai-based media relations professional.
“Am waiting for my salary, checking the online account every few minutes,” quipped Riitu Suri, a retail salesperson in Sharjah who said she wanted to remit a lump sum last month but decided to wait another month to see if she could get a better rate.
“Am so glad I waited. Last month I would have got an exchange rate of less than 18 [against the UAE dirham]. Now I just might get 18.50,” she said, adding that she’ll be able to remit at least Rs20,000 more thanks to the favourable rate.
Down 2.85 per cent this month so far, the rupee has emerged as the worst performing major Asian currency in January, surpassing the Philippine peso and Malaysian Ringgit’s 1.9 per cent declines.
With forex reserves of $347 billion, India’s central bank, the Reserve Bank of India (RBI), has a stated policy of stepping in to temper down volatile fluctuations in the currency by buying or selling US dollars from its reserves.
However, the RBI seems to have remained a passive witness this time around, sitting on the sidelines and seemingly unperturbed to see the rupee sink to new lows.
One of the obvious reasons is that with China actively and passively allowing its currency yuan to devalue – the renminbi is down more than 7.5 per cent in the past 9 months – India is looking to maintain the rupee’s competitiveness in the international exports market.
The other, slightly more controversial reason is that India, despite its forex reserves, may be facing a liquidity squeeze. Yesterday, the RBI said it had rejected bids for 91-day notes at a sale that aimed to raise Rs9,000 crore (about $1.3 billion).
India saw foreign investors pulling out $1.64 billion from the share market in January so far, and if things continue, the currency will continue to face the consequences of investors fleeing to the ‘safety’ of the US dollar and/or gold.