Indian rupee latest rate: 18.18 vs Dh1

The Indian rupee was at 66.80 to one US dollar this morning, and 17.97 to the UAE dirham. While holding steady at the 65 to the dollar mark for most of yesterday, the rupee did fall by 30 paise by the close of trading to close at 66, the rate at which it opened today and was still at at 8am UAE time.

September 2

Indian rupee was holding firm, in relative terms, trading around 65.92  to the US dollar, approximately 17.95 to the UAE dirham at close of trading in India.

Despite drastic drops over the last week, the rupee opened stronger today than its Rs69.05 vs $1 on August 28, and has held so far without fluctuating.

Earlier report:

As the Indian rupee hovers around the Rs18-mark against the UAE dirham, exchange houses in the UAE are now offering non-resident Indians Rs17.85 or so against every dirham during their monthly remittances.

The rupee has been falling as if there was no tomorrow, with the Indian currency hitting a series of lifetime lows in August, landing at Rs18.80 against the UAE dirham (Rs69.05 vs. $1) on August 28, 2013.

At that time, the rupee was down a massive 13.5 per cent in the month of August – the worst monthly plunge in the history of the rupee. The currency, however, did recover during the last three days of the month, but still ended the month down more than 8 per cent.

Now that a new month has turned over and with most of us receiving our salaries over the weekend, the big question for NRIs, then, is to whether remit right away or hold on for a more lucrative exchange rate?

In short, can the Indian rupee fall further or has it seen its final lowest-ever level, at least in the short term?

India’s economic woes are far from over, and the same could be said for the under-siege rupee.

Official data released on Saturday, August 30, revealed that India’s GDP growth slowed down to 4.4 per cent year-on-year in the April-June quarter, short of analyst expectations of a 4.7 per cent growth. For an economy accustomed to a 9 per cent growth even after the financial crisis, this is a huge comedown and may result in further shrinking of the equity markets and the rupee.

With the data announced in after-hours on Saturday, it will be tomorrow (Monday) that investors – both local and foreign – will let us know what they think of the numbers when markets open.

A mid-week technical perspective on the Indian currency published by brokerage house HDFC Securities maintains the rupee’s resistance levels against the US dollar between Rs70.60 and Rs72 for the coming two months. This means that, technically speaking, the rupee could fall to Rs19.60 vs. Dh1 in the next 60 days.

Of course, 60-day support levels in the same report are set at between Rs65.55 and Rs63.20, which means that, technically, the rupee could even recover to Rs17.20 vs. Dh1.

Going by the rupee’s recent track record, however, it is in serious danger of breaching the Rs70-mark against the US dollar and Rs19 vs. Dh1.

According to research from Standard Chartered bank, the slowdown in Indian economy is spreading. “Except for government expenditure and agriculture, the rest of the economy slowed from previous quarters. Most worrisome are the anaemic trends in consumption and investment,” wrote StanChart analyst Anubhuti Sahay.

“We do not expect any improvement in Q2-FY14 as sentiment remained weak and proxy indicators underlined continued stress. A favourable monsoon, election-related spending and better global growth in H2-FY14 should provide some support, but high leverage, high interest rates and policy uncertainty remain strong headwinds,” the report stated.

“India will find it difficult to return to a high-growth path without investment, in our view. Q3-FY14 will likely be the best quarter of the year, as we expect headline GDP to be c. 5 per cent y/y on better monsoons and a favourable base effect,” it further added.

In addition, the bank says that there remain downside risks to its 4.7 per cent annual GDP growth prediction. “Risks to our GDP forecast are to the downside and may materialise if FX [forex] losses continue and interest rates stay high in H2-FY14. We expect FY14 GDP growth at 4.7 per cent y/y, the worst since 2003 and much slower than the 5 per cent growth in FY13.”

To be fair, the steps that India’s authorities have taken in recent times will, at some time, start showing the desired results. In fact, India once again raised the retail price of petrol today, September 1, by more than 3.5 per cent, citing a volatile forex and global oil markets.

In addition, the country has escalated the gold import duty to a high 10 per cent, placed a ban on air passengers carrying duty-free flat-panel TVs from abroad, and implemented strict capital control measures on corporates and individuals in India in a bid to stem the outflow of dollars. 

Still, according to data published by the Reserve Bank of India (RBI), India’s foreign exchange reserves declined by more than $1 billion and fell to about $277.7bn for the week ended August 23, 2013. This suggests that India, the world’s fourth largest oil importer, remains in dire need of foreign exchange to fund its day-to-day imports bill not to mention a ballooning capital account deficit.

In the first five months of its financial year, India’s fiscal deficit has reached about 63 per cent of its target for the entire year, which ends in March 2014.

This means that the authorities will need to show utmost fiscal discipline in the remaining seven months and make do with the remainder 37 per cent to stay within the target. With general elections coming up in May 2014, that is highly unlikely to happen, as was evident from the recent passing of the $20bn food security bill, which analysts say will starve the economy of vital funding.

Global rating agencies have warned that if India fails to stick to its 4.8 per cent fiscal deficit target set by the finance minister in the annual budget, they will have no choice but to downgrade its economy, which will bring further bad news as far as foreign investment is concerned.

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