Indian rupee today edged higher to 68.34 against the US dollar, but is not very far from its all-time low of 68.87, recorded in November 2016.
On Wednesday, the rupee had closed at an 18-month low 68.42 against the US dollar amid capital outflows and concerns over macro-economic conditions.
A rising dollar and a surge in global crude prices have also weighed on the rupee. The rupee is down over 6 per cent against the US dollar so far this year.
Forex advisory firm IFA Global says that the possibility of rupee heading towards 70 per dollar is increasing. There is a still room for further depreciation from current levels, it adds.
The relentless slide of the rupee caused jitters among businesses and investors in India. However, it is good news for non-resident money remitters across the Gulf as they gain more in exchange rate.
Rupee vs Gulf currencies
Below are the rates of INR vs Gulf currencies as on Thursday, 24 May 2018:
- AED 1 = INR 18.62
- QAR 1 = INR 18.78
- SAR 1 = INR 18.23
- BHD 1 = INR 181.08
- KWD 1 = INR 226.23
- OMR 1 = INR 177.61
Further depreciation expected
The Indian currency has been on a downward path since last year, owing to higher oil prices and stronger US dollar.
According to Forbes, the rupee’s current fall in value could be attributed to two main factors: oil prices and yields on the U.S. Treasury. Improving oil prices have also prompted a recovery in overall remittance flows from the GCC to India that had taken a hit in 2016.
Promoth Manghat, executive director of Finablr and CEO of UAE Exchange Group, told Khaleej Times that the Indian currency has been fluctuating for the past few weeks and plummeted to its lowest since February 2017.
“This depreciation, particularly during the Holy Month of Ramadan, has resulted in a substantial increase in remittances to India. Looking at the pattern, we see anywhere around eight to 10 per cent increase in remittances whenever there is a depreciation of the Indian rupee.”
Adeeb Ahamed, MD, LuLu Financial Group, said since the rupee closed at 18.63 against UAE Dirham on Wednesday, it could move between 18.75 and 18.80 within the next few days.
“The rupee continues to slide on account of rising oil prices and the general bearish movement of the equity markets. All currencies, including the euro and pound, have also weakened in this context,” Ahamed told KT.
However, the rupee’s fall could be limited if the Reserve Bank of India decides to intervene. “The rupee might stop depreciating if the Reserve Bank of India starts lifting the interest rates to combat rising inflation,” Promoth Manghat told Forbes Middle East.
Remittance flows to India could continue to improve over the medium term if the rupee continues to fall in value, industry experts say.
Published on 24 May 2018