Indian rupee has hit the downward spiral again, falling below ₹83 against the US dollar, setting off expectations of a spike in remittances, especially from the Gulf-based non-resident Indians (NRIs) to India.
Currency market experts expect the rupee to cross ₹84 against the greenback in a near-term basis, fuelled by a multi-week high rise in the dollar index and crude prices.
Banking circles said NRI remittances to India tend to surge whenever the exchange value of the Indian currency falls against the greenback, as also AED, as expats can get more bucks for each dollar or Dirham remitted.
Rupee’s exchange value against the USD and AED move in tandem as the UAE currency is also pegged against the US currency.
Many banks in Kerala, which account for the larger chunk of expat Indians in the Gulf countries, expect a bigger jump in remittances in the current and coming week as the rupee fall also coincides with the Onam season, the state’s biggest festival period which marks one of the high points in expat remittances to the state.
“We expect a significant rise in expat remittances, especially from the Gulf region in the coming days as NRIs could take advantage of the current fall in rupee value to send higher amounts than what otherwise they would have planned,” a senior official with a Kerala-based private bank, who wished not to be identified, told Arabian Business.
Onam falls on August 29, though the festival celebrations almost run through the entire month.
Major fall in rupee value
The rupee depreciated 29 paise to settle at a 12-month low of 83.12 against the US dollar on Monday, weighed down by a strong greenback overseas and firm crude oil prices in the international markets.
Increased foreign fund outflows from India also weighed on the Indian currency, analysts said.
The currency trading market is closed in India today (Wednesday) on account of the Parsi new year.
“Rupee slipped to multi-month lows after the dollar index surged to seven-week high to hit above the 103 mark on Tuesday on the back of upbeat US [macro-economic] data. The US 10-year bond yields, fetching above 4.20 percent, also exert pressure on the rupee and other emerging market currencies,” Manoj Jain, a currency market expert and director of Prithvi Finmart Pvt Ltd, told Arabian Business.
“Consumer price inflation in India hitting a seven-month high, Brent prices at $85 a barrel and worse than expected Chinese data supporting the dollar are also negatives for rupee,” Jain said, adding that “in the near term we are expecting rupee could test 83.50-83.80 levels”.
Jain said there is a possibility of the rupee falling below ₹84 per USD if there is any Chinese stimulus in the near term to support oil prices.
Some of the other currency analysts also see the rupee even crossing 84 against the USD in a near-term basis.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose to 103.08 on Tuesday, while Brent crude futures, the global oil benchmark, were at $86.57 per barrel.
Falling rupee to push up expat remittances from Gulf
The projected fall in the rupee is seen to be pushing up expat Indian remittances, especially from the Gulf region, as banking circles said historically, NRI remittances, especially from the Middle East, see a surge in remittances when the rupee hits a downward spiral.
NRIs based in the Gulf region account for a larger chunk of expat remittances to India.
India received remittances to the tune of $100 billion in 2022 from overseas Indians, an increase of 12 percent in one year.
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