Expat remittances to India rise on falling rupee

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Indian nationals in Dubai queueing up at an exchange agency to send their remittances. Photo - Bellevision.com

The Indian Rupee on Monday fell sharply by 55 paise to close at fresh two-year low of 47.81/82 against the US currency as investors rushed for the dollar as a safe haven investment amid global worries.

Renewed dollar demand from importers and some banks and weakness in equities also weighed on the rupee, dealers said.

Failure in announcing a rescue for debt-ridden Greece by European finance ministers in a meeting on Friday hit the high risk assets like euro and equities, as traders went for dollar as a safe haven investment, leading to a smart rise in dollar value overseas, traders said.

Dollar index was up by about 0.7 per cent against its six major rivals in Europe.

As per Alpari Financial Services (India) CEO Pramit Brahmbhatt: “Indian equity markets traded weak throughout the day and ended down by over 1 per cent which depreciated the rupee. Fall in euro and dollar demand from oil importers also helped dollar to gain against rupee.”

“High risk is still evident in the global economy with a general feeling that the European politicians won’t be able to solve the debt problem fundamentally. The cancellation of a visit by Greek Prime Minister to US also added to it,” Abhishek Goenka, CEO, India Forex Advisors said.

“The fall in the rupee is expected to continue and we can target 48.20 levels in near term,” he added.

Fresh dollar demand from banks and importers, in view of dollar firmness in overseas markets, mainly affected the rupee value against the American currency, a dealer said.

Meanwhile, US stocks fell sharply as renewed fears of a Greek debt default prompted investors to book some of last week’s gains and turn to toward the safety of US government debt, which also boosted the US Dollar.


As the Indian currency’s weakness helps Indian expatriates living in the UAE get more value for their dirhams when they remit funds back home. Currency experts say the flow of money transfers from the UAE to India is set to increase at a fast pace in the days ahead. A US dollar is worth Dh3.678. A reduction in dollar inflows and an increase in dollar outflows leads to the rupee’s depreciation.

Experts say the rupee’s movement in the near-term is set to track the dollar, which has seen a trend reversal over the past week from downright negative to medium-term positive as the US economy currently appears to be in a much better shape compared to Europe, which is grappling problems of high sovereign debts and slowing economic growth within the region.

“The Indian rupee is facing resistance at 48 to the dollar. If it closes at 48 to the dollar, it would go past 50,” predicted Musa Haddad, head trader with National Bank of Abu Dhabi Asset Management. “Any weakness in the dollar is a buying opportunity,” he added.

UAE-based money transfer companies have seen a sharp increase in remittances being sent to India as expatriates look to capitalise on the declining value of the rupee against the dirham.

A steady fall in the Indian rupee over the last two months has sparked a flurry of remittances from the dollar-pegged Gulf state as Indian expatriates look to take advantage of the fall.

?One thing that a lot of people are experiencing right now is not an increase in the number of remittances – although we have heard from different people that it is happening ? but definitely the principle amount that people are sending has increased because they will get more for their rupee,? Sobia Rahman, regional vice president for Western Union said.

London-based currency specialists First Rate FX said it had seen the number of transactions from either the UAE dirham or the US dollar into the Indian rupee increase 187 percent over the last 50 days.

??The majority of these transfers have been spot contracts, which means that the transaction is for the immediate delivery of funds. However, the number of forward contracts has increased by almost 50 percent, which shows that many people want to lock in the current rate of exchange for future transactions,? said Chris Canning, head market analyst at First Rate FX.

The Indian rupee was trading at 47.79/80 per dollar on Wednesday, the lowest in nearly two years amid concerns that Europe?s debt problems may snowball into a banking crisis that can roil global markets.

The rupee?s fall was in line with other regional currencies after credit rating agency Moody?s downgrade of Societe Generale and Credit Agricole hit risk sensitive currencies across the board.

India?s chief economic advisor to the finance minister, Kaushik Basu, said on Wednesday that there is not much the government can do to stem the weakening of the rupee.

The UAE, home to 1.7 million Indian expatriates, accounts for nearly 13 percent of the total remittance flow into India.

The rupee is expected to remain low in the short term but will increase before the end of the year, said Canning. ?Whilst it is unlikely that the central bank would artificially support the rupee, it is expected that the currency may remain weak for a prolonged period,? he said.

?Eventually, however, rates are expected to fall. Increasing inflation throughout India has been putting pressure on the Reserve Bank of India to raise interest rates, and this would support the rupee against further declines. Realistic levels of exchange could reverse to sub-INR 47 per USD by the end of the year.?

Experts believe that the sudden depreciation of the Indian currency does not usually benefit the low-income or blue-collar workers who comprise the large segment of the remitting population in the UAE.

Sudhir Shetty, chief operating officer of UAE Exchange, said that they have noticed an increase in transactions from the middle to high-income bracket.

“In the last week or so, we have seen increased activity happening in the large-ticket segment. These are from people who send money for investments rather than domestic commitments,” Shetty said.


Iqbal Seth, a restaurant delivery worker, was all smiles yesterday as he looked at a white bank slip and saw his monthly remittance to his family in India having grown by 1,000 rupees (Dh77).

The increase was due to the rupee’s declining value against the US dollar and dirham.

“I am a very lucky man because I usually send money home immediately, the day after I get my salary on the 10th of every month,” said the cheerful dispatch, who earns Dh 1,500 monthly and says he checks the exchange rate daily.

“But this time I was late and it’s very, very good. I usually cannot hold on to cash. I must send what I earn otherwise my house runs into trouble in India. I just check the rates so I know what it is.”

Seth sends his entire salary home, living off on AED300 a month from tips, with food and accommodation provided by his employer.

When the rupee hit the 48.01 mark to the US dollar on Wednesday, India’s central bank intervened and sold dollars to steady the market.


“If you are a true, shrewd businessman definitely you will send money to India now,” said Shabbir Rokadia, a Sharjah businessman who also planned to remit funds.

“It’s best not to take a chance and wait further. For anyone interested in making investments in the stock market, it’s a good time because the rupee is down.”

The annual foreign remittance from Indians in the UAE is around US$6.2 billion (Dh22.9bn), 12 per cent of India’s total foreign remittances, a recent Standard Chartered report showed.

While the largest volumes come from the workers and labourers who send money home to their families, smaller volumes of higher-value transactions are remitted by businessmen keen on investing in property and the stock market at home.

Sources: gulfnews, arabianbusiness, timesofindia, thenational?

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