Dubai: The highest Indian rupee remittances from the UAE may have to wait until August or September, when they could be between 20.15 and 20.28 for the dirham (74.74.50 against the dollar). On Thursday (June 10), one dirham yielded 19.87 rupees.
If so, it would be a marked improvement in the current flow of remittances to India, which has slowed significantly since the beginning of the year after a prolonged slump last year. The layoffs of more than 150,000 Indian workers during the pandemic was reflected in the 17% drop in remittances in 2020, according to the latest World Bank report.
At 20.15-20.28 dirham levels would be a “good opportunity for remittances,” said Rajiv Raipancholia, CEO of Orient Exchange and secretary of Ferg (Foreign Exchange Remittance Group).
Raipancholia calculates that by August-September the employment situation would have stabilized and with the Expo kicking off, more remittance opportunities would be the natural result.
After weakening during the start of the second wave of COVID-19 in India, the rupee has since proved quite resilient. For this, the rupee had to thank the strong inflows of dollars into the country. Furthermore, the weakness of the dollar during the period.
The rupee has been largely optimistic so far this month, with India experiencing steady dips in daily coronavirus cases. Divyanit Sood, FX Strategist at Credit Suisse, said that “the rupee is likely to appreciate steadily in the near term, following the broader appreciation of the Asian currency exchange, supported by the broader dollar weakness and the resumption of growth with the loosening of blocks “.
A waiting game
NRIs in the UAE and the Gulf will therefore have to show some patience if they are to time their next round of sizable remittances when the rupee drops to well over 20 at the dirham mark. Since the beginning of 2020, there have been multiple times where level 20 has been breached, but the rupee has managed to turn back pretty soon.
Central bank position
It is also expected that the latest decision by the Reserve Bank of India (RBI) to keep interest rates unchanged will favor the inflow of foreign capital into India. Antony Jos, who heads the financial services division at Joyalukkas Group, said: The rupee is likely to maintain the same momentum or strengthen around 72.30 in the coming months based on the RBI’s forecast of forex reserves exceeding 600 billion. dollars on the back of robust capital inflows. “(Foreign exchange reserves have in fact exceeded the $ 600 billion mark.)
The downward trend in coronavirus cases in India should eventually lead to a recovery from the blockade-induced trade constraints. This also adds to the near-term positive sentiments around the Indian currency.
The economic outlook will weigh
But there will be other problems that the rupee will have to face, in particular the prospects for economic recovery. “A normalization of trade flows and at the same time a strong inflow of FDI (foreign direct investment) will help the currency to strengthen,” said Jos. “But interest rates could see a decline in July if the above equation doesn’t work well, considering oil price increases and what that would do to inflation.
“This would add pressure on the rupee in the coming months.”
If that means another 20 violation of dirham status, NRIs would be waiting …