Diwali comes early for UAE Indians: Rupee sinks to 18.12 vs Dh1

It’s the Indian festival of Dhanteras today, signifying wealth and prosperity. And the Indian rupee slumping to four-week-low this morning is perfect opportunity for Indian expats in the UAE and elsewhere in the world to remit ‘dhana’ (money) at a favourable exchange rate.

The Indian rupee was trading at Rs18.12 vs Dh1 at 5.40am UAE time today (November 9, 2015), having breached the Rs18-mark against the UAE dirham for the first time since September 28 this year.

The INR is now within touching distance of the two-year-low of Rs18.24 it made on August 24, 2015, offering Indian expats a great opportunity to remit money home during the festive season.

More than a third of remittances to India (35 per cent) originate in the GCC, and the region’s economic resilience is good news for the Asian country as remittances continue to pour into it.

According to the recent World Bank report, remittances to India are projected to increase by 2.5 per cent in 2015, well above the 0.6 per cent increase the country witnessed in 2014.

Already the world’s largest remittance recipient, non-resident Indians from all over the world sent home $70.3 billion in 2014, and that figure is set to grow to more than $72bn this year.

“Stronger remittance growth in India reflects improving economic prospects in the US and continued fiscally-supported economic resilience in the GCC countries,” the World Bank said in its latest note.

“World Bank’s latest report endorses the fact that despite a challenging economic phase with decline in oil prices creating stress on fiscal health, the GCC economies will continue to be a major source of remittance to South Asian corridors, of which India is a major recipient,” said Sudhesh Giriyan, Sudhesh Giriyan, COO, Xpress Money.

The World Bank report also notes that even as the average global cost of remittance remains a high 7.7 per cent, the UAE has one of the least expensive cost of remittances, helping the surge in remittances especially to India and Pakistan.

“The UAE’s fee is among the lowest in the world at 2 per cent, which is one of the reasons for UAE-India remittance corridor to overtake the traditionally leading US-India corridor,” said Promoth Manghat, CEO, UAE Exchange.

“Remittances from oil-exporting countries of the GCC continued to grow as currencies were linked to USD and also they have used their reserves to maintain spending levels,” he said.

“In the send market, the observation of the [World Bank] report testifies the resilience of the Gulf markets to withstand shocks while in the receiving market like India, establishment of small rural banks will expand the financial services infrastructure increasing the remittance prospects further. Remittances to South Asian countries especially to India have seen a surge in the wake of the strengthening of the US dollar – with dirham pegged to the US currency fetching more value in the local currency (INR),” added Xpress Money’s Giriyan.

“In this context Gulf markets have remained a major source of remittances including the UAE, Saudi Arabia and Kuwait, the latter two showing significant growth in last couple of years. UAE has also maintained its position as the top remittance sending country for India and the trend will continue to persist in the near future,” he said.

The World Bank report highlights the recent growth in remittances to Pakistan and other south Asian nations. “The rise in regional remittances also reflects continued strong growth in remittances to Pakistan (a 17.8 per cent increase in 2015 compared to 16.7 per cent in 2014) and a dramatic rise in remittances to Nepal in response to the earthquake (projected at 14.3 per cent in 2015 versus 5.2 per cent in 2014),” the report states.

According to Nepal’s central bank, the average daily remittance rate surged by over 30 per cent following the earthquake (April 14 to May 14 compared to the previous 30 days). Remittances are extremely important to several countries in the region: remittances to Pakistan, Sri Lanka, Nepal and Bangladesh exceeded 6 per cent of GDP and 60 per cent of reserves in 2014, says the World Bank report.

The region’s economic resilience is proving to be good news for not just India, but also other major expat source nations like Pakistan, Sri Lanka and Bangladesh, with the south Asian countries set to benefit from a surge in remittances thanks to strong dollar.

The Pakistani rupee was trading at Rs28.73 at 9am UAE time this morning, its lowest level since late December 2013.

The Sri Lankan rupee, on the other hand, recently made a lifetime low when it breached LKR39 versus Dh1 on October 23. It was trading at LKR38.94 at 6.50am UAE time this morning.

The Nepalese rupee was trading at NPR29.19 at 8.20am UAE time today, near the currency’s lifetime low of NPR29.25 made on September 8 this year.

The Bangladeshi taka made a two-and-a-half-year low last month when it traded at BDT21.64 on October 23. The last time it traded at these levels was in January 2013. The currency was trading at BDT21.53 vs Dh1 at 7.10am UAE time this morning.

(Image via Shutterstock)

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