Indian rupee steadies after Thursday’s drop, should you hold off remitting?

Weakness in the rupee’s value against the US dollar will be automatically reflected in its exchange rate with the UAE dirham as the UAE currency is pegged to the dollar.

The Indian rupee traded in a narrow band against the US currency on Friday amid a pause in the dollar’s decline. The currency opened at 79.67 and has traded in a less than ten paise range so far.

“It is shaping up to be a very quiet session. We are more or less in the middle of 79-80 band that markets expect in the near-term,” a trader at a state-run bank said. “Risks are higher for a move above 80 than to 79.”

The dollar index inched higher on Friday after falling for four straight sessions. A revival in risk appetite has pulled the safe-haven dollar down from a multi-year high of 109.29 hit on July 14 to near 105 now.

The dollar, going ahead, may receive support from recent comments of US Federal Reserve officials that seem to suggest that the central bank will continue its hawkish stance despite the relief on inflation front.

An uptick in dollar could push the rupee back to its record low of 80.0650 reached on July 19, analysts evaluate, implying near-term weakness against the UAE dirham. So it would be ideal to hold off on remittances.

The Indian rupee depreciated 12 paise at close on Thursday after reversing early gains due to sharp rise in oil prices. At the interbank foreign exchange market, rupee ended at 79.64, after opening strong at 79.2225 from its previous close of 79.52.

The crude oil prices in the international market has risen sharply and at the close of Indian market hours, it was $98.39 a barrel, up 1.02 per cent.

The rupee appreciated in the early trade after the US inflation data for July came in below the estimates, raising hopes that the Federal Reserve may not be that aggressive in hiking interest rates in its next meeting.