India's central bank was expected to raise interest rates to curb inflation but unexpectedly held off
UAE's Indian community cashing in on remittance bonanza as rupee slides further
The UAE's Indian workforce was getting great value for the remittance payments this weekend thanks to plunging rupee rates.
One US dollar is currently valued at about 74 Indian rupees - in January the exchange rate was closer to 63 rupees. On Saturday, the rupee was trading at 20.028 to the dirham.
Indian workers earning dirhams, pegged to the US dollar, are benefiting from the boom after officials in Delhi made the unexpected decision to freeze central bank interest rates.
That followed consecutive hikes in the summer from 6 per cent to 6.25 per cent and again to the current level of 6.5 per cent.
Along with sending money home, financially savvy residents have withdrawn cash to stockpile with the intention of selling it back to trading houses when the rate rises, according to Akhil Harshan, a branch supervisor at UAE Exchange in Abu Dhabi.
“The currency rate has been continuing to fall, and although the weekend has been slow generally, we have seen an increase in demand for money transfers for Indian rupees,” he said.
“People are taking the opportunity to help their families back home or just to send money there to top up their savings.
“Most of the business we are seeing is transfers from dirhams to rupees but we are also seeing an interest from customers to take out larger volumes of currency than we would usually expect.”
The value of the money they send home has increased by around 10 per cent since the start of 2018, as the Indian rupee remains the worst performer of Asian currencies this year.
“We had a similar demand earlier this year for euros, and it is not an uncommon trend when we see big moves in the market,” Mr Harshan said.
“Remittance is a big part of living here for many, so it is not unexpected to see an increase in volume when there are preferable rates.
“Occasionally we have to get more currency in, but most of the transactions are being transferred online.”
While a dip in the value of rupees may be good news for workers in the UAE, some are concerned about the soaring cost of living back home - which the summer interest rate hikes were meant to curb.
Read more on the remittance rush:
It is almost two years since India was plunged into a cash crisis when Prime Minister Narendra Modi invalidated 86 per cent of India’s currency by banning high-denomination currency notes.
The 500 rupees (Dh24.85) and 1,000 rupees (Dh49.70) were the highest value currencies withdrawn by the government to try and wrestle back control of black market cash and crack-down on corruption.
The result was an economic slide in which millions working in cash in hand jobs went unpaid, though personal income tax collections increased by 27 per cent in the year after the move.
Rising oil prices are also contributing to the weakening of the currency.
To arrest its currency slide, the Indian government has since stepped in to raise taxes on 19 non-essential imports, such as fridges and shoes.
Saanvi works in a department store in Abu Dhabi Marina Mall and sends money back to her two sisters and elderly mother in Kolkata when she can.
She is planning to send an extra Dh300 back this month, because of the preferential exchange rates.
“I don’t earn a great deal, but I send back what I can,” she said.
“Every little helps, but these kind of rate changes usually means life is getting more expensive for my family back home, so it evens out.”