NRI alert: Indian rupee likely to hit 20.7 versus dirham

Dubai - Planning to remit money? Hold it. The rupee is likely to weaken in the months ahead.

If you’re a Non-Resident Indian (NRI) and looking to remit a large volume of funds to your home country, hold it for now because the rupee is likely to weaken in the months ahead, and likely to fetch a better conversion rate.

According to a new study by Geneva-based Pictet Wealth Management, the rupee is projected to drop by around 4.5 per cent over the next 12 months from the current price to hit 76 against the US dollar, or 20.7 versus the UAE dirham.

The Indian rupee was trading at 72.74 against the greenback (19.8 versus dirham) on Wednesday, according to alexa.com. Pictet Wealth projects Indian currency trading at 74.5 in three months, 75.5 in six months, and 76 in 12 months.

The rupee outperformed most of the other emerging market currencies from the start of the year until well into March. But at the end of March, the sharp deterioration in the Covid-19 situation in India led to downward pressure on the rupee.

But the South Asian currency made a good recovery in the past month, notably because the Indian government resisted imposing a national lockdown, which would have had a dire impact on the Indian economy. The currency has risen from 75.4 on April 22 to 72.7 on May 26.

Luc Luyet, the forex strategist at Pictet Wealth, said high inflation and the already large amount of liquidity in the system limit the ability of the Reserve Bank of India (RBI), the country's central bank, to intervene much further on the spot market.