Indian rupee likely to fall further against the UAE dirham - Gulf Business
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Indian rupee likely to fall further against the UAE dirham

Indian rupee likely to fall further against the UAE dirham

The rupee may touch 21 against the UAE dirham by the end of the year, says expert

The Indian rupee is likely to fall further against the UAE dirham this year, industry experts have said.

The Indian currency has fallen steeply against the US dollar this year, and on Wednesday morning touched a new low of 73.405 per dollar in early trade before recovering slightly.

It is currently trading at 19.96 against the dirham (according to at 9.20am) after touching 20.05 on Tuesday.

The rupee is one of Asia’s worst performing currencies this year its rate against the dollar is the lowest in approximately 10 years.

“Emerging market currencies, especially the Indian rupee, have been hit considerably this year due to rising global crude oil prices, trade war, debt outflows from India, US Fed rate hikes and dollar strengthening against other global currencies,” said Promoth Manghat, executive director and group CEO of Finablr.

Brent Crude oil prices touched a four-year high this week, and were trading at $84.73 per barrel on Wednesday morning.

“Looking at the present dynamic conditions, both economic and political, and the forthcoming India elections next year, we expect the rupee to slip further by Q1 2019,” added Manghat.

Sudhesh Giriyan, COO of Xpress Money, agreed that the Indian rupee is on the verge of reaching a “new historic low”.

“In anticipation of trade tariff hikes and increase in the interest rates by the US fed, the emerging market currencies remain volatile,” he said.

On Monday, the Reserve Bank of India (RBI) announced that it would inject liquidity of Rs36,000 crore into the market in October by way of purchase of government bonds. This would help meet the country’s needs for larger amounts of funds during the upcoming festival season.

The auctions to purchase the government bonds are part of the Open Market Operations (OMO) which will be concluded by the end of October.

“In spite of the likely intervention by RBI in terms of injecting liquidity in the market by purchasing government bonds in October, the rupee is likely to fall further and may touch 21 against the UAE dirham by the end of the year,” said Giriyan.

“From an economic perspective, this decline may have a positive impact on the export industry in India as exports from the country will increase and the lower exchange rate will also boost tourism to the country.

“As for Indian expats, they stand to gain on the amount they are remitting back home due to favourable exchange rates. It is an ideal time for NRIs to invest in the country and in-turn, pump more money into the economy,” he added.

The UAE saw foreign remittances surge 13.1 per cent in the first half of the year to Dhs88bn ($23.95bn), according to the central bank.

Indians accounted for 36.7 per cent of remittances in Q1 and for 39.6 per cent of transfers in the second quarter, the report stated.

Read more: UAE sees foreign remittances increase 13.1% in H1



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