The Indian rupee, which plunged to its life time low of 78.28 to the US dollar on Monday, is predicted to fall to 79 in the near-term basis, weighed down by further hardening of interest rates in the US and the rising crude prices internationally, triggering talks of a surge in non-resident Indian (NRI) remittances from the Gulf region in the coming weeks.
Currency market experts said the Indian currency could cross 80 against the greenback in a three-month period on the back of concerns on surge in foreign fund pull outs from India and rising inflation.
Rupee was trading at 78.05 INR to US dollar and 21.25 INR against AED in the early trading hours on Tuesday.
Banking circles said they expect a jump in NRI (non-resident Indian) remittances, especially from the Gulf region, in the wake of significant fall in rupee value against US dollar and AED in the last few days.
Movement of rupee against US dollar and AED has a major influence on remittances and transfers by NRIs working in the Gulf region, to India.
“We see a spurt in foreign fund inflows and remittances, especially from the Middle East region, whenever rupee sees major depreciation (against USD),” said a senior official with a Kerala-based private bank, who wished not to be named.
The official, however, declined to share the data on NRI remittances in the recent months.
Kerala-based banks receive a large chunk of expat remittances, as people from the state account for the largest share of Indian expats working in the Middle East.
“We expect further weakening of the rupee because of the rise in US dollar index and continued increase in crude prices. In a near-term basis, rupee could hit a low of 79 and may cross 80 in a three-month time frame,” Ajay Kedia, managing director of Kedia Comms Trade and Research, told Arabian Business.
Kedia said though India still was in a comfort zone due to the high foreign currency reserves of the country, rising concerns on widening of India’s current account deficits on account of crude prices, as also surging domestic inflation could keep rupee under pressure in the coming weeks.
Brent crude prices continued to hold above $120 per barrel level on account of global supply concerns.
India meets almost 85 percent of its fuel needs through imports.
Historically, the weakening trend of rupee lead to a surge in non-resident Indian (NRI) remittances to the South Asian country, as expats can earn more bucks for each dollar remitted.
Expat Indians based in the Gulf region accounts for a larger chunk of NRI remittances to India.
Total NRI remittances to India were estimated to be a little over $15 billion in the last quarter of 2021, according to available data by market research firms.
The current fall of rupee is attributed to speculations surrounding aggressive rate hikes by the US Fed, lifting the US dollar index and treasury yield.
Official data showed the US consumer prices accelerated to 8.6 percent in May 2022, the most in over four decades.
In India, the Reserve Bank of India last week raised its key repo rate by 50 bps to 4.9 percent after May’s surprise 40 bps off-cycle hike to tame surging inflation.
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