By James Mathew
Rupee exchange value against dollar has a strong bearing on NRI remittances to India
The Indian rupee lost about 34 paise in the last 3 trading sessions to touch 71.90 against the US dollar, while gold prices in the Indian market shot up to a record level of $607 (Rs 43,700) per 10 gram, on the back of heavy selling in India's equity market, strengthening of dollar index and rising concerns on spread of coronavirus globally.
Market analysts expect rupee to see a downside of another 50 paise from the current level in the short-term, if further rise in fresh coronavurus cases are reported in the coming days.
“We see rupee trading in the range of 72.40 – 70.80 in March, depending on the situation on the virus disease," Ajay Kedia, managing director of Kedia Commodities and Research, told Arabian Business.
“If the virus spread is no contained in the next few days, rupee will see further weakening. Otherwise, it could stage a recovery in the next few days as other factors, mainly oil prices, are stable or positive for the Indian currency now,” Kedia added.
Rupee exchange value against dollar has a strong bearing on NRI (non-resident Indian) remittances to India, which surge whenever rupee weakens against US dollar.
Currency market analysts said except for the fear on the virus spread and strengthening of the dollar index, other factors which influence movement of rupee against dollar are currently stable, and therefore the downside for the Indian currency from this level will be very limited.
They also attributed the heavy selling in the Indian equity market to the rising fears on the spread of the virus infection.
Even as rupee suffered a fall, gold prices in the Indian market have surged to record level in the last few days, touching $607 per 10 gram on Tuesday.
Bullion and jewellery industry circles attributed the surge in gold prices to speculation.
“The current price surge in gold prices is purely on account of speculative activities, fuelling fears of coronavirus infections dragging down world growth,” Surendra Mehta, Secretary of Indian Bullion and Jewellers Association (IBJA), told Arabian Business.
“We have advised customers not to buy gold at current prices. We have a duty to protect our consumers also, as we believe the prices to cool down in the coming days once the fear on the virus front subsides,”Mehta said.
The rising prices have dented gold demand in India, with industry circles talking about a 50 percent fall in demand during January – February this year, compared to that of last year.
“Even gold imports have also seen a 50 percent fall in January this year, compared to 50 tonne import figure of January last year,” Mehta said.
He added, however, the official import figures for January 2020 import are not yet out.
UAE and Switzerland are among the major countries for import of refined gold for India. Ghana and Peru are the other source countries for India’s gold imports.