Indian expatriates in the UAE are keeping a close eye on the fluctuations of the Indian rupee, which recently reached a record low of ₹88.17 per US dollar. This drop has impacted the exchange rate against the UAE dirham, now standing at ₹24.05. For families sending remittances back home, this depreciation means that their dirham is now more valuable in terms of rupees. However, the critical question looms: will this favorable exchange rate last, or is further depreciation on the horizon?
Several factors are contributing to the rupee’s current weakness. A stronger US dollar has been a prominent issue, exerting downward pressure on various major currencies, including the rupee. Additionally, recent trade tensions have escalated, with the US imposing tariffs of up to 50% on certain Indian goods and exerting penalties on India’s oil transactions with Russia. These actions have adversely affected investor sentiment regarding the Indian economy.
The Reserve Bank of India (RBI) has intervened through state banking channels to mitigate the rupee’s decline. However, such interventions primarily stabilize short-term volatility rather than reversing the longer-term downtrend.
India’s Finance Minister Nirmala Sitharaman has publicly acknowledged the rupee’s performance but reassured citizens that the situation is not unique to India. “This is not the case only with rupee versus dollar; it’s the case with many other currencies versus the dollar,” she stated, emphasizing that the government is closely monitoring exchange rates.
For UAE-based remitters, the implications of the rupee’s volatility vary across time frames. In the short term, ongoing tariffs and a restrictive U.S. monetary policy suggest that the rupee is likely to remain weak, which can be advantageous for those sending money home now. In the medium term, the outlook depends heavily on potential rate cuts by the US Federal Reserve and whether India can alleviate its trade tensions.
Because the UAE dirham is pegged to the US dollar, fluctuations against the greenback inherently affect the exchange rate between the AED and INR. Currently, expats are witnessing relatively advantageous conversion rates. However, there is a degree of risk involved; actions by the RBI or a relaxing of US tariffs could stabilize the rupee, potentially diminishing the current benefits. Therefore, Indian expats in the UAE are encouraged to take advantage of these favorable rates while they last.
