UAE: Indian rupee could drop further against dirham due to new Omicron Covid variant

The Indian rupee is likely to fall further as investors flee riskier assets and move towards safe-haven assets like the US dollar following the outbreak of a new, more contagious variant of Covid-19.

Omicron, the new Covid variant, has been reported in some African and European countries.

Analysts expect the rupee could slide around 1.4 per cent to 80 against the US dollar (or 20.7 versus the Emirati dirham) in the near term. According to xe.com, the rupee strengthened from 20.55 on October 13 to 20.13 on November 9. But the Asian currency began its slide again and was trading at 20.4 versus the dirham on Sunday.

Emerging markets are considered as risk-on assets from a global investment perspective, while US treasuries are regarded as safe-haven assets.

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“Before the discovery of the new Covid-19 variant, Indian equities were among the best-performing assets globally. So it is pretty probable that investors will book some profits off the table,” Century Financial said in a note.

Moreover, the Reserve Bank of India, which was forecast to raise the reserve repo rate at its December 8 meeting, could now become cautious.

“Already, Indian government yields have fallen in response to the Covid news. This can fuel a sell-off in the Indian rupee, and it could decline to 20.70 against the UAE dirham this week. Overall the Indian rupee could breach 80 mark in the coming months,” it said.

-waheedabbas@khaleejtimes.com

• Dubai