By James Mathew
Weakening rupee value will be good news for expat Indians, especially those who work in the Gulf countries when they remit money to India
India's currency tumbled 26 paise or 0.37 percent on Monday morning trading hours to reach 72.04 against US dollar, reacting to a surge in oil prices and apprehensions of further escalation in the Middle East conflict.
Foreign currency market analysts predict further weakening of rupee value to 74 level against dollar in the current quarter due to a combination of factors including rising Middle East tension driving up oil and gold prices and their impact on India’s fiscal and current account calculations.
“If tensions (in Middle East) escalate further from here, Brent crude has the potential to test $85 a barrel. Rising crude prices will have a direct impact on rupee,” Tarun Satsangi, a leading forex and commodity market analyst, told Arabian Business.
“Indian rupee will continue the weakening streaks,” he added.
Weakening rupee value will be good news for expat Indians, especially those who work in the Gulf countries when they remit money to India. UAE tops the list of countries from which India receives remittances.
Banking circles said they see a spurt in NRI (non-resident Indian) remittances to India, especially from the Gulf region.
Remittances in India increased to $16.37 billion in the third quarter of 2019 from $14.64 billion in the second quarter of the year.
India's equity market also fell sharply on Monday, with the Bombay Stock Exchange benchmark index S&P Sensex crashing by 704 points to 40758 by noon.
Gold prices in India also surged to new highs on Monday, driven by a rally in global rates amid US-Iran tensions.
The February gold futures on India’s leading commodity exchange MCX jumped 2.3 percent or $12.74 on Monday to a record high of $569.58 per 10 gram.
On Friday, gold prices had surged over 2 percent or $11.80 per 10 gram, taking the total rise in gold prices in the India market to about $25 per 10 gram in two days.
Traders said the Middle East tensions increased the appeal of safe haven assets like gold.