Indian rupee slumps; UAE remittances to surge

The battered Indian rupee made an all-time low of Rs15.71 against the UAE dirham (Rs57.72 against the US dollar) at 9:10am UAE time (5:10 GMT) on Monday as persistent dollar demand from Indian importers and banks continue to push the currency lower.



The current bout of dollar strength and the consequent weakness in the Indian rupee as well as the Philippines peso (trading at PHP11.57 vs. Dh1, near one-year low) and Pakistani rupee (trading at PKR26.82 vs. Dh1, near its all-time low of PKR26.84 made last week) are bound to increase the remittance flow from the UAE and the rest of the Gulf countries.

The Indian rupee broke its all-time record of Rs15.55 against Dh1 set last year on June 22, 2012, and is in the danger of further slumping unless the Reserve Bank of India (RBI) intervenes in the market and dumps dollars. India has foreign exchange reserves of around $290 billion at its disposal, which the country's monetary bodies can and do use to defuse volatility in its currency.

The US dollar has been gaining currency (pun intended) on fears that an improving American economy will see the US Federal Reserve contracting its quantitative easing programme, which will stem the flow of easy money into emerging markets on the one hand, and will further bolster the dollar on the other.