Dubai: Money exchange houses in the UAE are again expecting brisk business this week as the US dollar continued to strengthen amid heightened expectations of another increase in borrowing costs in the US.
The Philippine peso slumped to a ten-year low against the greenback on Tuesday, closing at 50.23 to a dollar, the lowest since September 26, 2006.
The Asian currency also traded at 13.68 against the UAE currency, which is pegged to the US dollar, registering a 5.6 per cent decline from its 12.95-to-a-dirham close in February 2015.
“Peso is at its lowest today,” Promoth Manghat, CEO of UAE Exchange told Gulf News on Tuesday.
The other currencies may not be at their weakest in years but they are starting to sag and are likely to follow the downtrend, with the euro closing at 3.884 against the dirham and the rupee ending at 18.16, according to UAE Exchange.
A rise in the UAE dirham is good news for expatriates in the UAE, as it means stronger remittance power.
“With the dirham rising against other currencies, we do expect remittance transactions to go up. Also next week happens to be salary time, so the regular remitters would be sending money home,” Manghat added.
The US dollar has been putting pressure on a number of currencies, as expectations of a rate increase are again building up.
Analysts have said there is a high probability that the Federal Open Market Committee (FOMC) in the US, which sets the interest rates that banks use to lend each other, will make another adjustment at its meeting in March.
US Federal Reserve chair Janet Yellen signalled another rate increase this year amid a good economic situation and a strong employment sector.
David Kohl, chief currency strategist and head economist for Germany at Julius Baer, said the American currency is likely to strengthen further in the months to come.
He said they believe that there is a high probability that the FOMC could increase the Fed funds target rate to 0.75 to 1 per cent at its next meeting on March 15.
“The acknowledgment of the good economic backdrop and a solid labour market show the Fed’s determination to increase interest rates. The hints that the US economy can deal very well with somewhat higher interest rates are an additional sign of the central bank’s readiness,” said Kohl.
