Euro vs Pound: Score savings by delaying remittance plans to December!
Sending money from Dubai to Europe? How to get the best exchange rate
Highlights
Against the UAE dirham, the British pound and the euro are expected to weaken in the coming month from its present levels. Here's how you can take advantage of these upcoming rates when remitting money to the UK or anywhere else in Europe.
Dubai: Thinking of sending some cash to the UK or anywhere else in Europe? Hold on to your dirhams! Just like booking a flight, timing your money transfer can save you some serious money.
The first step is figuring out if the currency in the country you are remitting to is going to rise or fall in value soon? This can make a big difference in how much money your friends or families end up receiving after you send.
While the British pound and the euro are less prone to fluctuations than some South Asian ones (think Indian rupee, Pakistani rupee, and Philippine peso), even small changes can add up to big savings when you're sending a hefty chunk of change.
Currency on the rise? Send now and save! On the flip side, if your home turf's currency is getting stronger, don't delay! The exchange rate will only go up, so remitting now saves you money in the long run.
British pound to get weaker, don’t remit now!
“The British pound (GBP) or Sterling’s exchange rate has been largely unchanged since the year began, which would have steadily stagnated remittances and overseas transactions,” explained Jasdeep Singh, Dubai-based forex trader and analyst. “But surprisingly, a strengthening US dollar will hurt the pound.
“With the new US President-elect Donald Trump's policies seen supporting the greenback further, the pound will stay weak for now, and exchange rates will turn favourable for overseas remittances going in December. This will reflect against the UAE dirham as well.”
Another reason analysts are flagging that the pound may soon find more room to drop in value is because the dollar’s rise in value is also supported by the US central bank announcing narrower-than-expected rate cut last week and a similar cut in December. The pound is at 0.79 against the dollar.
“Similarly, against the UAE dirham – which is pegged to the US dollar, the pound value is seen slipping from its current value of 0.21, which implies that you should avoid remitting now and instead send money when the value slips in December, to get more value for your dirhams,” added Trivedi.
“With the British Sterling’s potential drop against the US dollar, UK investors will soon benefit when investing in US shares or stocks, which are dealt in the soon-to-be-stronger US dollar,” noted Anil Pillai, an Abu Dhabi-based banking analyst specialised in forex payments.
“Additionally, those with savings in the UK will be benefitted from their fixed-term cash deposits still offering high yields. However, this benefit is expected to be fleeting with interest rates being cut in the country.”
How a weaker euro will hurt UAE remittances
Against the US dollar, the euro exchange rate has dropped in value against the US dollar since the start of the year, but steadied last few months, analysed Pillai. It is at 0.95 versus the US dollar currently. But what will forex rates look like next month?
“A steady euro seen in recent months may have stalled remittances, but with the euro’s fortunes to change against a strengthening US dollar, it would be cost effective to postpone remittance plans as the lower valued currency should taken advantage of before they rise,” said Pillai.
“US rates that are no longer as drastic as October narrows the interest rate gap between the US and the Eurozone, turning exchange rates volatile between the Euro vs. the US dollar,” Pillai agreed, which is in line with the recent forecasts from top investment banks worldwide as well.
“What this means for UAE remittances is that a weakening euro will lead to a pickup in expats sending money to anywhere in Europe, as the decline in value will be reflected against the UAE dirham as well. In other words, it would be cost effective to delay remittances to December.”
Bottom line?
When it comes to remitting the euro or the British pound, it would be comparatively cost-effective to remit in December when exchange rates turn remittance-friendly. This should provide UAE-based expats clarity on how they should plan their upcoming remittances to the UK or anywhere else in Europe.