Currency weakens to Rs14.1 against the Dirham

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By Shweta Jain, Senior Reporter, Gulf News
Published: 00:00 November 22, 2011
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Dubai: Continuing its steady decline, the Indian rupee fell on Monday to a new low of Rs14.1953 against the UAE dirham (and Rs52.20 against the US dollar), marking the lowest level since March 2009 due to a combination of factors including absence of intervention from India's central bank and increasing concerns over the US deficit and European debt.

The move has brought cheer to the Indian expatriate community in the UAE, and market experts expect the good mood to continue as they expect the rupee to fall further in the coming days.

"Technically, we expect the rupee to reach 14.25 for a dirham, or 52.40 as the next rupee level for a dollar," Sajith Kumar P.K., Director and CEO of JRG International Brokerage DMCC, told Gulf News. "The Indian rupee will continue its downward trend due to the Indian economic situation such as high inflation and lower investments by FIIs [foreign institutional investors]."

Sentiments

Echoing Kumar's views, Pradeep Unni, senior relationship manager at Dubai-based Richcomm Global Services DMCC, said: "The sentiments are clearly pointing to further weakness as the rupee's fortunes are linked to the euro's trend and the EU debt crisis."

However, the decline is proving beneficial for the UAE's Indian business community. One such businessman, Kamal Vachani, Director of retailers Al Maya Group, told Gulf News: "This is good news for the Indian businessmen based in the UAE. For instance, if we want to get something from India, there is scope for getting a better deal on prices. So it's great news. However, I think it should stabilise soon."

Kumar of JRG International says: "The weakening Indian rupee will result in an increase in Indian inflation and will prove negative for the Indian import and export business." Further, the depreciating rupee is most certainly going to result in an increase in remittances to India from the UAE in the coming days if the current exchange rate levels persist, said Unni. "Already, there are reports that remittances have gone up by around 20-25 pr cent over the last one month," he said.

European front

He said the rupee's fall will continue until Europe stabilises. "The European issues will be directly impacting the rupee as a weaker euro is negative for the rupee," Unni said.

Yesterday's rupee fall also came on the back of a sharp fall in local stocks amid lingering nervousness about Europe's economic problems. The Bombay Stock Exchange's Sensitive Index fell 425.41 points to 15,946.10 yesterday, its worst fall in over eight weeks.

Free fall: Turmoil on many fronts

•425.41 - points drop in Sensex yesterday
•Rs14.25 - mark against the dirham likely to be achieved