Highlights
Against the UAE dirham, the Euro is expected to rise from its present level of 0.25 in the coming weeks, with the British pound expected to stay at its current low level of 0.21. Here's how you can take advantage of these upcoming rates.
Dubai: When it comes to sending money back home, it is vital to know whether it is currently an ideal time to remit. To understand whether it is or isn’t, one should first find out if your currency back home is expected to rise or fall in the days to come.
Here is an analysis of how currencies like the British pound and the euro have been performing and expected to perform in the coming weeks, to help understand whether remitting money now is profitable or cost-effective, or should you wait it out for a few weeks for a better rate to come along.
Although the above-mentioned currencies don’t fluctuate as much as South Asian currencies like the Indian rupee, Pakistani rupee and Philippine peso, however small the changes will result in bigger savings the more money you remit.
If a currency is expected to weaken or depreciate, it's prudent to take advantage of more remittance-friendly rates after it drops further, rather than now. On the other hand, when it comes to currencies that are expected to appreciate in values, it would be cost-effective to remit now, as the rates would only rise over the near term.
The British pound or Sterling’s exchange rate has been on a downward trend since the year began, which would have encouraged remittances and overseas transactions
British pound to get stronger or weaker?
“The British pound or Sterling’s exchange rate has been on a downward trend since the year began, which would have encouraged remittances and overseas transactions,” explained Amit Trivedi, UAE-based forex analyst and trader.
“After a period of steady decline, the pound to US dollar exchange rate is currently closer to the bottom-end of the historical trading range, which caused it to drop against UAE dirham as well.”
Patrick Locke, Global FX Strategist at global banking giant JP Morgan noted a week ago that the pound is continued to be viewed as an underperformer among other top currencies, while opining that the trend is expected to continue.
“Given that the currency has been on a declining trend, the pound is widely expected to stay weak in the weeks to come. Against the UAE dirham, the British pound is expected to stay at its current low level of 0.21 in the coming weeks, enabling you to cost-effectively remit in the days to come,” added Trivedi.
“Because of sterling’s fall against the dollar, UK investors now might not be the best time to invest reduced pound in shares or global stocks, which are mostly dealt with in US dollars,” noted Brody Dunn, an investment advisor at a global wealth management firm.
“However, those with savings in the UK might finally have something to smile about as cash deposits are finally beginning to pick up, albeit still well below the rate of inflation.”
How a rising Euro can affect UAE remittances
Against the US dollar, the Euro exchange rate has risen over 5 per cent in the past six months on the back of moderately improved economic sentiment in the eurozone, as well as the slowing of interest rate hikes by the US central bank,” he added.
“This has reduced the greenback or dollar’s appeal as a safe haven and such weakness would discourage people from remitting overseas.”
Steve Englander, head of global G-10 FX research at UK-based lender Standard Chartered, said that trends from the beginning of 2023 indicate that the Euro should only get stronger in the months to come.
Forex strategists at US-based research firm Trading Economics said the Euro, against the US dollar, is expected to trade at current levels in a year’s time – levels of strength seen reflecting against the UAE dirham as well. What this essentially means to expats is that remittances should not postponed any longer.
Bottom line?
The Euro is still much stronger than it was against the pound in the 1990s and for most of the 2000s; but the pound’s depreciation is a long-term trend since it was allowed to float freely in 1971.
“If you concern yourself with exchange rates only when you’re about to head off abroad on holiday, know that changes to the currency’s value have wider ramifications beyond the price you’ll pay overseas,” said Anil Pillai, a UAE-based banking analyst specialised in forex payments.
“When it comes to remittances, it is important to understand that, while Sterling has fallen to a level not seen for fifty years, the currency has been lower against the Euro at the height of the financial crisis in 2008, and still bounced back. So it does brighten the remittance prospects for expats.”
When it comes to the Euro, however, fortunes may be changing. As of June 6, the Euro’s exchange rate was at 0.91, up 5 per cent in the last six months, against the US dollar. If this trend continues, it would mean that it would be comparatively cost-effective to remit now.
