Dubai: Money outflows from the UAE to some Asian countries have increased over the last few days on the back of a strong US dollar.
Transactions are also expected to rise further as expatriates have increasing number of reasons to repatriate funds, with the next payday just around the corner and Christmas and New Year celebrations fast approaching.
The demonetisation of the 500 and 1,000 rupee banknotes also means higher demand for currency transfer services in the UAE, as Indian expatriates rush to help families back home who are unable to use their old bills.
“There are huge queues in banks to exchange [abolished bills]. People need to wait five to seven hours to exchange their old banknotes,” said Rajiv Raipancholia, secretary of Foreign Exchange and Remittance Group (Ferg).
"[Because these old] notes cannot be used anymore] we have seen a surge in Indian rupee remittances since 10th November, as people remitting funds need to cater for the day to day activities of their loved ones in India," Raipancholia told Gulf News.
"In India, due to demonetisation of certain denominations, there is scarcity of hard cash in the market. For this reason, non-resident Indians tend to send more money to bank accounts. Also since Christmas and New Year are round the corner, more money is being remitted," added Promoth Manghat, chief executive officer, UAE Exchange.
The dollar has been gaining strength against several currencies since Donald Trump won the presidential elections, rallying without a pause for much of the month of November, reaching near 14-year highs.
This has been fueled by expectations that the new president could drive up inflation in the United States (US). The Indian rupee depreciated on Thursday to a record low of 68.86, the lowest since August 2015. The Philippine peso also touched the 50 level, just barely above the exchange rate in 2008, when the peso plunged to 50.15.
“The peso has been consistently depreciating since January this year and has seen a seven-year low (while) the Indian rupee has been depreciating for a few weeks now and reached 18.75 to a dirham,” said Sudhesh Giriyan, COO of Xpress Money.
“We have surely seen a spike in remittances from the white-collar segment who look for opportunities such as these to send large amounts of money home. Since salaries are getting dispersed this week, we will definitely see a spike in remittances over the next few days,” Giriyan added.
India and the Philippines are among the largest recipients of remittances from expatriates around the world. As of 2015, money transfers to India and the Philippines reached $72 billion and $30 billion, respectively, according to the World Bank.
Foreign workers in the UAE send about $19 billion (Dh70 billion) to their home countries in one year, making the UAE the world’s fourth top remittance-sending country. As of 2014, the aggregate outflows accounted for 4.8 per cent of the UAE’s gross domestic product (GDP), according to World Bank data.
“A favourable rate would always attract people to remit funds home as there is a monthly requirement. This is backed by good timings just a month ahead of the festivals, Christmas and New Year,” said Raipancholia.
”In December we do always see a spike in remittances but this time due to the favourable rate for India and Philippines we expect a much larger increase.”
Demand for currency transfers to India has also increased since the crackdown on black money, as UAE expatriates rushed to send cash to families who are unable to use their old 500 and 1,000 banknotes.
“There are huge queues in banks to exchange [abolished bills]. People need to wait five to seven hours to exchange their old banknotes [and expatriates based in UAE] have to cater to day-to-day activities for their loved ones in India,” added Raipancholia.