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Stronger rupee awaits Indian expats in UAE

Indian expatriates in the UAE may not be seeing a favourable remittance rate going forward, as the rupee is getting stronger against the US dollar and is expected to continue its gains until the end of the month.

Indian expatriates in the UAE may not be seeing a favourable remittance rate going forward, as the rupee is getting stronger against the US dollar and is expected to continue its gains until the end of the month.

The rupee strengthened to its highest level in a month on Thursday at 54.12 against the dollar as investors grew hopeful the government would be able to win a key vote on foreign direct investment (FDI) in retail in on Friday.

Sudhir Kumar Shetty, COO-Global Operations at UAE Exchange said: “Rupee will definitely continue to gain through the month and hit 52.75 level by the end of the year. As the currency has been gaining this week, on an average Indian expatriates have got approximately rupees 14.75 for one UAE dirham.”

[See video: India’s FDI in retail issue]

S. Nagarajan, chief rupee dealer at Al Rostamani exchange said: “If the FDI is approved, the rupee will become stronger and hit 53.20, in which case, an Indian expatriate in the UAE will get rupees 14.48 for one UAE dirham,”

French banking group Credit Agricole on Thursday said the rupee could rise to 52 per dollar by end of 2013, signalling a trend of stronger rupee in months to come.

REMITTANCES TO INDIA

Indian expatriates in the region had once-in-a-lifetime opportunity to make the most of the favourable rate when the rupee slumped to its worst-ever exchange rate (57.32) on June 22.  One UAE dirham had fetched rupees 15.60 on that day.

But as the Indian rupee was gaining throughout the first week of December, expats are not rushing to send money home due to fears of a bad exchange rate.

An area manager of a leading currency exchange in the Emirates said: “This week expats were holding on to their money as they knew the rupee was getting stronger and so wouldn’t be getting a good exchange rate. I don’t expect an increase in remittances as the currency is set to gain more by the end of the month.”

Sudhir Kumar Shetty of UAE Exchange explains the trends of Indian expats:

“Indian rupee has been on an appreciating mode in the last week. Remittances were more or less steady in the last quarter too. We have not noticed huge volumes in remittances this year compared to last year.”

UAE Exchange, a leading player in the money transfer business, has more than 122 branches in the Emirates.

Though expatriates have not been so eager to send money home this quarter, overall, India is set to receive massive remittances this year compared to previous years.
 

Remittances to India, especially from Gulf Countries, are likely to increase to a record $70 billion, according to data released by World Bank.

Regions and countries with large numbers of migrants in oil exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, the World Bank report said.


Factors that can weaken Indian rupee

  • Global economic performance - Poor economic conditions in the euro zone, plunging stock markets and falling foreign investment inflows to India can weaken the Indian rupee.

  • Income levels influence currencies through consumer spending. When incomes increase, people spend more. Higher demand for imported goods increases demand for foreign currencies and, thus, weakens the Indian rupee.

  • Strong US dollar - Traditionally rupee loses its value when the US dollar strengthens.

  • Inflationary pressure - Inflation is the rise in prices of goods and services. Prices shoot up when goods and services are scarce or money is in excess supply. If prices increase, it means the value of the currency has eroded and its purchasing power has fallen.