Rupee remains volatile as NRIs debate pros and cons




Whatever the merits or demerits of the crashing Indian rupee, Indian expatriates across the Kingdom prefer their national currency to be strong. “When the rupee was equivalent to the dollar in 1947, the year India got its independence, why has our currency been sliding in value year after year,” one of them asked.
“Frankly speaking, we are not benefiting from the falling rupee. It is a temporary phenomenon. As an Indian, I want to see a stronger rupee,” said Asif Deshmukh, a long-time resident of Jeddah.
“The falling rupee is putting heavy indirect pressure on salaried workers through rising prices,” he told Arab News.
I don’t look for these types of short-term gains. What are we gaining? May be a few thousands here and there through remittances. I want to see the Indian economy stronger because it will create more opportunities for Indians living there,” said Deshmukh.
“I am hopeful that the rupee will rebound soon because India has the potential to weather any kind of financial storm,” he added.
Riyaz Khatib, manager at a sports shop in Dubai, said: “When he came to Dubai 38 years ago AED474 were fetching Rs.1,000 (AED1 = Rs. 2.10) but now for AED58.80 we get Rs. 1,000 (AED1 = Rs.17). That time when one dirham was fetching less when the rupee was strong, the expenses were manageable but now despite getting more rupees in the currency exchange market, the expenses are not manageable at home.”
Another Indian expatriate, who has been in the Kingdom for nearly three decades and wants to remain anonymous, said: “We have seen many ups and downs of the rupee over the years. We have not benefited from the falling rupee worth mentioning. The biggest issue is salaries don’t increase in proportion to the rise in prices. So the gap stays.”
The Indian rupee hit a series of record lows last week, falling as much as 65.56 to a dollar on Thursday, making its Asia’s worst performer so far in 2013.
The rupee, however, bounced back 2.09 percent — its biggest one-day gain since September 2012 — to end trade at 63.20 Friday, up from its record closing low of 64.55 the previous day, Reuters said.
The rupee has been trading in the oversold zone with its 14-day relative strength index hitting 82.8 due to six straight day of losses as of Thursday’s close, implying increasing likelihood of the currency recovering some of its recent losses in short term, technical analysts say.
Anything above 70 is considered an oversold territory.
Policymakers in India stepped in late Thursday to calm markets.
Finance Minister Palaniappan Chidambaram said that the rupee was “undervalued.”
Reserve Bank of India Gov. Duvvuri Subbarao also chimed in, saying that the central bank would continue with its cash tightening steps until the rupee stabilizes, Reuters said.
John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, suggested that the Indian government left the plunging currency to market forces and shifted its focus to boosting exports and investment.
“The RBI’s shift in strategy offers strong policy support for fixed income. The central bank’s moves will help to anchor short-term rates and contain the upward pressure on long-term bond yields,” he told Arab News.
“The two main concerns that have driven INR weakness in recent weeks — expectations of Fed tapering and India’s ability to fund its current account and fiscal deficits — remain ‘live’ issues that will continue to hit sentiment,” said Sfakianakis.
Jarmo T. Kotilaine, a regional analyst, commented: “The situation for the rupee is unlikely to change dramatically in the near term but India does have significant sources resilience in the form of low foreign debt and reserves that should easily cover more than half a year of imports. This and a likely tightening of the monetary stance should contain downside risks. Recurrent volatility is possible as investors speculate about the likely impact of exit strategies from QE2. The current situation is, for now at least, likely to encourage tactical remittances.”
In India, the manufacturing sector is disappointed with the falling rupee and the resultant state of the economy. “It is generally said that the falling value of the rupee is a boon to the manufacturing sector as this is the right time to boost their exports. With the country’s manufacturing in low key, thanks to the government’s total apathy and neglect, what do we have to export?,” an official of a textile manufacturing organization said in Mumbai.


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