RIYADH: The Indian currency has crossed the 50-mark against a US dollar yet again sending alarming signals in Indian markets, especially to those dependent on the greenback fluctuations. However, a large section of the Indian Diaspora in the Gulf is not complaining.
Hardly a year ago the Indian rupee was below the 40-mark against the US dollar and the current price is 20 percent higher in favor of dollar in just one year. With low returns on remittance and high inflation rate in India, last year was bad for millions of nonresident Indians (NRIs) especially those based in the Gulf as they remit money regularly to their families.
The Gulf NRIs not only had to endure high inflation in the Gulf but also poor conversion rates for their currency. Some even wondered whether it was worth staying on in the Gulf given the robust economic prospects that seemed to exist back home.
However, things have now changed and the paradox is that even as world economies go through one of its worst slowdowns, the Indian community in the Gulf is enjoying life as usual - if not a shade better.
“I now get more money in Indian currency when I transfer funds back home.
The inflation in India has slowed, things are said to be cheaper than what they used to be. This means my family can buy more goods and save better,” a Riyadhbased NRI, who did not wished to be named, said. “Even if the inflation on the ground remains little more than government figures, which shows a sharp decline, the remarkable fall of Indian rupee has made our life a little easier,” added another.
A year ago “experts” were predicting the rupee to register a high of 35 against the dollar but contrary to that it somersaulted and collapsed to 50. “I converted most of my dollar savings to Indian rupees to hedge my imagined losses. But it turned out to be a wrong move, and I wonder whether I should believe these experts at all,” said another NRI. He works for a large petrochemical firm in Riyadh but does not want his name to be quoted.
The Indian rupee hit a record low of 50.60 per dollar on Thursday and opened near its record low yesterday. Traders said its fall was stopped by aggressive dollar sales by some state-run banks reportedly at the behest of India’s central bank.
This means rupee could go further down as the situation is unlikely to improve in the short term.
Some “experts” are forecasting the rupee to touch the 55-mark in the near term. Indian Finance Minister P.
Chidambaram had announced recently that the Reserve Bank of India (RBI) would do the needful to arrest the depreciating trend. The bank did intervene over the last two months but has not been able to arrest the slide so far.
It is also not clear till what level the RBI would keep intervening though it may not admit to having any such target figure.
The ongoing volatility has left some investors at the crossroads. At what level should they convert their dollar denominated investments into INR remains a key issue. There is no clear indicator as experts have been wrong time and again with their predictions and analysis. The investors need to make their own call. As in the case of equities it seems difficult to predict what’s right in the currency market.
