Muscat - While Britain's vote for exit from the European Union played havoc in global financial markets, the news brought cheer to Asian expatriates living in Oman. Money exchanges across Oman reported rise in remittances by people from different Asian countries including India, Pakistan, Bangladesh and Indonesia. South Korea's won, Philippines' peso and the Malaysian ringgit also slid. But the most affected currency because of the Brexit vote is Indian rupee which plunged 96 paise against the US dollar and crashed below the 68-level on Friday. China's yuan fell to its weakest level against dollar in more than five years.
Sustained bouts of dollar demand from importers amid weakness in other Asian currencies also weighed on the rupee. On Saturday, while one Omani rial fetched 176.50 Indian rupees, currencies of Pakistan, Bangladesh, Sri Lanka and Philippines received 272.10, 203.70, 381.40 and 121.60, respectively, at some exchanges. In a historic referendum, Britain voted to exit from the European Union with 51.9 per cent of the voters backing the decision to leave the group. It sent shock waves to the financial markets across the globe.
According to Philip Koshy, General Manager, Modern Money Exchange, Indian expatriates are taking advantage of the decline of the Indian rupee against the US dollar, triggered by the Brexit vote.
He said that his exchange has registered more than 20 per cent increase in the volume of transactions mad by expatriates from different Asian countries.
"Increased amount of remittances is being done by the large-ticket segment. These are from people who send money for investments rather than domestic commitments", he told Observer.
Abdul Aziz, Business Development Manager, Al Jadeed Exchange said that there has been substantial rise in the volume of remittances.
"The decline in the rupee value coupled with the upcoming festival season is aiding the rise", he said.
But experts say that the depreciation of the Indian currency doesn't usually benefit the low-income or blue-collar workers who comprise the large segment of the remitting population in Oman.
"Poorer expatriates who have families to support back home are compelled to transfer funds abroad every month, regardless of the rise or fall of the rupee", opined Tonny Alexander, Director, Oman UAE Exchange.
"The latest bout of weakening of the rupee is the result of a sentimental reaction", he said.
According to him, India has enough 'firepower' to deal with the Brexit fallout.
The Reserve Bank of India (RBI) will intervene, when required to infuse liquidity to help the currency, he opined.
The RBI Governor Raghuram Rajan said on Friday that the central bank was watching markets closely on the fallout of UK voting for exit from the European Union and was ready to act if there was any disorderly behaviour.
"There are concerns from Brexit referendum, see no immediate dire impact on Britain. Have been in touch with Central Banks across the world on Brexit. We are watching all markets both internationally and domestically, where necessary will provide liquidity," he was quoted as saying.
The UK and European Union account for 23.7 per cent of the rupee's effective exchange rate, according to Nomura Research calculations. The UK's exit could lead to a prolonged period of risk aversion in the equity markets which could spark foreign portfolio investor outflows and add to the rupee's weakness.
While on the positive side, Brexit has driven away fears of a US Fed rate hike and could lead to lower commodity prices, there is a side effect: it could open more room for RBI to cut rates, which won't be a positive for the rupee.
© Oman Daily Observer 2016
