Indian rupee slips to record low against UAE dirham, but RBI likely curbs losses
<p>The Indian rupee has recently slipped to a record low against the UAE dirham, reflecting mounting pressure from global economic uncertainties, a strong US dollar, rising crude oil prices, and persistent foreign capital outflows. Since the UAE dirham is pegged to the US dollar, any strengthening of the dollar directly impacts the rupee’s performance against the dirham, increasing the cost of imports and overseas transactions for Indian businesses and consumers.</p><p>This depreciation has significant implications for India’s economy, particularly for sectors heavily dependent on imports such as oil, electronics, and gold. A weaker rupee also raises concerns about inflation, as higher import costs may eventually be passed on to consumers. Additionally, Indian expatriates and businesses dealing with the Middle East may face increased currency conversion expenses.</p><p>Despite these challenges, market experts believe that the Reserve Bank of India (RBI) is unlikely to allow sharp or disorderly movements in the currency. The RBI has a strong track record of intervening in the forex market by selling dollars from its substantial foreign exchange reserves to smooth excessive volatility. Such measures help maintain investor confidence and prevent panic-driven movements.</p><p>Moreover, India’s macroeconomic fundamentals remain relatively stable, supported by robust foreign exchange reserves, steady economic growth, and controlled inflation compared to many global peers. These factors provide the RBI with sufficient room to manage currency fluctuations effectively.</p><p>While the rupee may remain under pressure in the short term due to global factors, experts expect the RBI’s proactive approach to help curb deeper losses against the UAE dirham. In the medium to long term, improved capital inflows and easing global uncertainties could support a gradual stabilization of the Indian currency.</p>