Indians in the UAE look to cash-in on rupee's record low against US dollar

While dirham would stretch further back home, careful budgeting and investing are essential in uncertain economy

Indians in the UAE are planning send more money back home to help in everything from daily expenses and education costs to savings and investments. AFP

Indians in the UAE are considering how to best take advantage of the rupee's record-low level against the US dollar, hit by the Trump administration's high tariffs.

The US on Wednesday doubled its tariffs to India to 50 per cent – the highest for any Asian country. That resulted in the rupee falling to a record of 88.3075 against the dollar during intraday trading on Friday before settling 0.65 per cent lower at 88.1950, its biggest one-day loss since May.

That also marked the first time the currency breached the 88-rupee-per-dollar mark. The rate, as of Saturday, stands at about 88.15 rupees.

'More than usual'

A weaker currency tends to increase remittances, especially in emerging markets. India is one such destination, with a substantial number of citizens working abroad and their families receiving money on a regular basis.

“Perfect timing, as salaries just came in,” Anthony Fernandes, an international media strategist in Dubai, told The National.

“Everything is expensive back home … with this comes some relief and [my family] can manage costs more easily and daily expenses feel lighter.”

The favourable exchange rate also means each dirham goes further in India, said Ian Saldanha, a resident of Dubai.

“I try to take advantage of these opportunities whenever they arise,” he told The National.

But despite more cash at their disposal, Indian families are prudent, as they still feel the pinch of rising prices for imported items and essentials.

“It feels like the right time to support them with bigger [sums] rather than just regular expenses … for my family, the extra value from remittances really helps – daily expenses, education costs and even savings become easier to manage,” Hozefa A, another Dubai resident, told The National.

The money would be “mostly for long-term things … [such as] for home improvements we’ve been postponing”.

“So, while the remittances do stretch further, household budgets still need careful planning,” she added.

Tariff-triggered

The tariffs – a move used by the US aimed at punishing New Delhi for Russian oil imports – escalated an economic war with a worldwide ripple effect.

That has caused a lot of concern for India's domestic economy, South Asia's largest, with consumers and businesses wary of its ill effects.

Combined with a global trade slowdown and geopolitical uncertainties, the levies are expected to have a non-uniform impact on the Indian economy, said Dipti Deshpande, a principal economist at Mumbai-based Crisil Ratings.

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“Consumer demand – buoyed by healthy rural incomes, lower inflation and interest rates and income tax relief – is expected to remain robust in the coming quarters and support overall gross domestic product growth, while healthy government investment spending should continue to provide buffer,” she said.

However, in the absence of a trade deal between India and the US, a few sectors, specifically smaller businesses, will have to brace for a bigger impact from the tariffs, she added.

Analysts expect the Reserve Bank of India to intervene to support the rupee, although it has so far not given any indication.

Investing in a little caution

Investing in assets is one more option Indians consider when the rupee weakens, taking advantage of a cheaper way to build a portfolio.

“It's a good time to explore small investments … because the same amount I send now can cover more than it usually does,” Ms Hozefa said.

Anthony Fernandes, an international media strategist in Dubai, says the lower value of the rupee would allow him to put more into fixed deposits in India, while also considering mutual funds. Photo: Anthony Fernandes

But despite the measure of confidence the weak currency brings, caution is needed, especially in anticipation of any volatility when it comes to exchange rates.

One alternative would be sending money to India for the sole purpose of using that cash there. If money is planned to be used in the source country, for example, in the UAE, it would be better to keep it in dirham or dollar accounts, Mr Saldanha said.

“I’ll likely invest part of it, but with the clear intention of using those funds for purposes in India … in the past, I learnt the hard way that investing in India purely for attractive returns can backfire when exchange rates fluctuate significantly,” he added.

For Mr Fernandes, the safest bet would be fixed deposits. He is also considering investing in mutual funds, but that is in the planning stages.

“I want to proceed with caution, given the current market situation,” he added.