Most UAE expats to enjoy better money transfer rates this year

Dubai: Many expatriates in the UAE will continue to benefit from favourable exchange rates for the rest of the year as the US dollar is forecast to strengthen further.

The American currency has been on a winning streak against a number of currencies from Asia — including those from Pakistan and the Philippines, which depreciated by 1.15 per cent and 0.19 per cent, respectively since September 2016.

The decline has been due to a number of factors, including lower oil prices, a spike in foreign institutional investor (FII) inflow, political stability and a number of government reforms, according to Raghu Mandagolathur, senior vice president for research at Kuwait Financial Centre “Markaz”.

Exception

The trend is likely to continue for many currencies, with the exception of the Indian rupee, which has so far risen in value against the dollar by nearly 5 per cent.

“For the [Pakistani and Philippine] currencies, the trend is expected to continue over the near- to medium-term, as the US continues to increase its interest rates leading to the outflow of capital from the markets,” Mandagolathur told Gulf News.

“However, India will continue to be the exception, as the local government, emboldened by its victory in recent state elections, would continue on its reform agenda.”

“INR will buck the trend and is expected to remain strong. The strong growth story, coupled with radical reforms [such as the demonitisation, Goods and Services Tax), can explain this strength. Also, this is helped by low oil prices and rise in FII and FDI (foreign direct investment inflow) to a great extent,” said Mandagolathur.

However, while most expats can wait for their respective currencies to decline further, Indian nationals, might not have the luxury of time to hold off remittances.  “Since [the Indian rupee] will remain strong, it is certainly advisable to remit money now than later,” he added.

A strong dollar is a boon for the UAE’s money transfer industry, as it encourages higher volume of remittance transactions. A solid greenback means that the remittances of UAE expatriates, whose salaries are pegged to the US dollar, will have higher buying power back in their home countries.

It also means that expats returning home for their annual vacation will be able to spend more out of their hard-earned dirhams.

Data compiled by FxexchangeRate.com showed that over the last three weeks alone, the Pakistani rupee fell from 28.49 to 28.50 against the UAE dirham, while the Philippine peso hovered between 13.6 and 13.7, the weakest rate recorded this month.

Aside from the Asian currencies, the British pound had earlier plunged to its lowest level over worries about the outcome of the Brexit negotiations. 

Last January, UAE expatriates made a dash for the nearest exchange house to benefit from the depreciation, causing remittance transactions to Europe alone to jump by 25 per cent.