(MENAFN- Khaleej Times) The Indian rupee dropped to 18.22 against the UAE dirham on Thursday and could come under further pressure, resulting in further decline in coming weeks, according to industry executives.
With the rupee hitting near all-time lows, currency analysts advise non-resident Indians to remit now by cashing in on a strong rates. Promoth Manghat, CEO of UAE Exchange, says the rupee could touch 18.55 against the UAE dirham in the short term, unless the Reserve Bank of India intervenes to stop its slide.
He pointed out that concerns about inflation in India, rising interest rates in the US and no capital inflow could pressure the government to intervene and arrest the rupee's slide.
The CEO noted that the remittances from the UAE have gone up around 8 per cent in the last weeks since the rupee touched 18.
"Of course, remittances have gone up 8 per cent in the last 2 weeks. Whenever the rupee depreciates, that is always the case."
Adeeb Ahamed, managing director at Lulu Financial Group, believes the rupee weakness would carry a bit further in coming weeks.
"The Indian rupee can test 67.08 against dollar. Much of this volatility is attributed to the geopolitical situation in parts of the Middle East, on account of which the oil prices are shooting up, which in turn is causing the currency movement," Ahamed said.
On the global front, oil prices are on the rise hitting $75 per barrel earlier this week as Opec-led supply cuts drained out excess supplies. If the trend continues, the rupee can weaken up to further 1 per cent further, forecasts Rajiv Raipancholia, CEO of Orient Exchange. He sees a high probability of the rupee hitting 67 against the greenback.
He stated that the rupee had been weighed down by a variety of factors, including concerns that faster tightening of US monetary policy and President Donald Trump's protectionism will hurt the Indian economy the most and spark capital outflows.
Sudhesh Giriyan, COO at Xpress Money, noted that there is a good likelihood that the rupee may weaken further in the coming weeks, blaming increasing trade deficit, rise in crude oil prices and capital outflows for the weakness.
Time to remit
However, the current exchange rate itself is very attractive from an Indian remitter's perspective since rupee is at its lowest level.
Manghat says the rupee would be dictated by the rising yields on US Treasury, India's current account deficit and rising oil prices in the Middle East. Considering the limited upside potential, the current level seems very good for the NRIs to remit their money.
India's current-account deficit widened to $13.5 billion in the three months ended December from $7.21 billion in the previous quarter, as the trade gap widened. The rupee is expected to traded at 64.88 by the end of this year, according to the median forecast of analysts surveyed by Bloomberg.
Meanwhile, remittances to developing countries touched over $466 billion in 2017, an 8.5 per cent increase as compared to 2016. India stayed the top beneficiary at $69 billion, a 9.9 per cent year-on-year growth, according to the latest World Bank report.
"India has a very high dependency on crude oil imports to meet its fuel requirements and therefore, the increase in crude oil prices impacts the currency negatively," he said, adding that there is every possibility of rupee weakening further.
Ahamed advised that with the Indian rupee touching 18 to the dirham, NRIs need to utilise this opportunity for remittance and investments back home.
The rupee had strengthened to 17.25 on January 5, its highest gain in the last one year. "The rate is particularly lucrative, as it is one of the best rates for the currency in the past 12 months," Lulu Financial Group chief said.
Raipancholia of Orient Exchange said India's foreign exchange reserves rose to a life-time high of $424.864 billion at the first week of April, aided by increase in foreign currency assets. The expectations of capital inflows into the country on the back of strong macro fundamentals along with record foreign capital reserves would limit the currency volatility. Therefore, it is a good level for NRIs to remit their savings to India but advised not to borrow and remit.
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