Indian Rupee Falls as US Tariffs Loom UAE Remittances Set to Rise

The Indian rupee dropped to 23.88 against the UAE dirham on Monday, marking its lowest point since August 8. This decline comes as a new set of US tariffs on Indian exports is set to take effect on August 27. Experts believe that the rupee could fall to 24 against the dirham for the first time, creating both challenges and opportunities for Indian expats in the UAE and other Gulf countries.

High Remittances Expected in September

According to currency experts, September remittances from Indian workers abroad are likely to be higher than usual. “September remittances will be especially high, given that it’s also the festival season in key markets such as Kerala, which is celebrating Onam,” said a senior official at a currency exchange house.

Leading remittance platforms in the UAE, including Botim and Comera, are offering exchange rates of 23.82 and 23.85, respectively, while e& is offering 23.84 per dirham. Exchange houses have generally pegged rates around 23.8.

Neelesh Gopalan, Treasury Manager at a Dubai remittance platform, explained, “Throughout August, the dirham to rupee has been very favourable for Indian expats. They should watch out for the 23.9 levels, which were seen on August 4. If the rupee weakens further, it could drop to 24 against the dirham.”

US Tariffs and Their Impact

The US is introducing new tariffs on Indian exports at a critical time for the Indian economy. The tariffs include a base rate of 25% plus an additional 25% for India importing oil from Russia. Indian businesses that export to the US are now exploring ways to deal with these higher tariffs.

The Indian government has maintained a firm stance in countering the US push to reduce oil imports from Russia, signaling that it is ready to protect the country's economic interests.

Indian Stock Market Feels the Pressure

The Indian stock market also reacted to the looming tariffs. On August 26, the Sensex fell nearly 552 points to 81,053, while the Nifty dropped 164 points to 24,804.

The Sensex had been performing positively in recent days, supported by expectations of upcoming changes to the Goods and Services Tax (GST). The government is expected to announce the details of GST rate cuts in early September.

Subramanian Sharma, founder of Mumbai-based Greenback Advisory Services, said, “With President Trump’s additional 25% tariff on Indian imports taking effect, the rupee remains vulnerable to further depreciation towards 88. However, much of this impact seems already priced in, as seen in $2.4 billion in equity outflows. The Reserve Bank of India is also expected to intervene if the rupee weakens excessively.”

Factors Supporting Medium-Term Stability

Despite the current weakness, there are factors that could support the rupee over the medium term. Prime Minister Modi’s proposed GST reforms, S&P’s recent credit rating upgrade, and India’s scheduled inclusion in the FTSE bond index from September are likely to provide stability.

Sharma added, “These developments are expected to help the rupee regain strength gradually, even though the immediate impact of tariffs is causing short-term pressure.”

The Indian rupee is experiencing a significant drop against the UAE dirham as new US tariffs on Indian exports come into effect. While the decline presents short-term challenges for businesses and the economy, Indian expats in the UAE may benefit from favorable exchange rates for remittances, especially during the festival season in September. The market is likely to remain volatile in the coming weeks, but medium-term factors such as GST reforms and international recognition may provide some support for the currency.