Dollar gains rekindle UAE expat hopes

Dubai: The recent gains by the dollar against leading international currencies have rekindled hopes of expatriates living in the UAE that their hard-earned money will buy more in their home countries.

The dollar appreciated more than six per cent against the euro during the past five months as it gained about seven per cent against sterling.

The dollar's gains are reflected in the exchange rate of the dirham against other currencies due the dirham's peg to the dollar.

The Indian rupee slipped eight per cent against the dirham in the past five months and the Pakistani rupee and Philippine peso went down 20 per cent and 11.5 per cent respectively.

The dollar hit a new six-month high against a basket of major currencies on Monday, benefiting from weakness in commodities and euro zone economies. The euro fell to a six-month low of $1.4645 in early Asian trade before recovering to $1.4717.

"Even though the rise [of the dollar against the euro] is not very much, every little change helps because when the dollar decreases in value, it hurts," said Markus Stebich, a German expatriate, told Gulf News.

During the past three years, UAE residents have been reeling under the rising cost of living and inflation hit an all-time high of 11.1 per cent in 2007.

The IMF estimates inflation will remain in double digits this year. In addition to the rising cost of living, most expatriates have been losing heavily due to declining exchange rates.

"The strengthening dollar has come as a big relief to expatriates who are earning in dirhams and saving and/or spending in their home currencies," said Sudhir Shetty, General Manager of UAE Exchange Centre.

The currency depreciation meant higher imported inflation in the UAE, aggravating the situation. With the high inflation and weak exchange rates, many expatriates who had fixed commitments such as college fees, mortgages and regular expenditures in their home countries were either forced to dip into their savings or borrow.

"When the dollar was depreciating, I had to cut down the amount of money I was sending to my family by nearly 50 per cent. Now that it's risen I can add even more to the original amount I send back home," said Aravindakshan P.G. Kurup, an Indian expatriate.

"While dollar has remained undervalued for long, the euro and sterling were overvalued and we expect the dollar to remain strong against these two currencies in the near term," said Shetty.

Do you think the dollar's upward trend is going to continue? Are you planning to convert your savings to dollars? Or is is too early? How do you see this impacting global businesses?