Pound vs Euro: UAE money transfers - time it right in May, save big on remittances
Sending money home from Dubai? Get the best exchange rate, here's how to
Highlights
Against the UAE dirham, the British pound and the euro are expected to weaken in the coming weeks from its present levels. Here's how you can take advantage of these upcoming rates when remitting money to the UK or anywhere in Europe.
Dubai: Thinking of sending some cash back home? 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 your home turf's currency is going to rise or fall in value soon? This can make a big difference in how much your loved ones get back home.
We've analysed currencies like the British pound and the euro to see if a money transfer now is a win or a wait-it-out situation. While these currencies 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.
Weakening currency? Wait for the drop! If your home country's currency is taking a tumble, sit tight! The exchange rate will get better as it weakens, so you can send more later.
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 stronger or weaker?
“The British pound (GBP) or Sterling’s exchange rate has been largely steady since the year began, which would have discouraged remittances and overseas transactions,” explained Amit Trivedi, UAE-based forex analyst and trader.
“However, the pound to US dollar exchange rate has been closer to the bottom-end of the historical trading range, which caused it to drop in value against UAE dirham as well. As it was recently flagged that further rate cuts can't be ruled out, the pound will stay remittance friendly in the coming weeks.”
This is why analysts are widely flagging that the pound will find room to fall in value against the US dollar, with the near-term UK outlook still “gloomy”, and the dollar is seen reversing from its highs after the US central bank signalled four rate cuts in 2024. “So, the pound, now at 0.79 against the dollar, can drop in value to 0.83-0.85 soon,” added Trivedi.
“Similarly, against the UAE dirham, the pound value is seen strengthening from its current level of 0.22, which implies that remittance plans will likely stay in place or get postponed to when the value drops, and you get more value for your dirhams when remitting overseas.”
“Because of sterling’s fall against the dollar, now might not be the best time to invest the reduced pound in shares or global stocks for UK investors, which are mostly dealt in the now-strong US dollar,” noted Brody Dunn, an investment advisor at a global wealth management firm located in Abu Dhabi.
“But 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. Given that the central bank indicated on Thursday that the economic growth is still in a state of limbo, only time will give clarity.”
How a weaker Euro can affect UAE remittances
Against the US Dollar, the Euro exchange rate has dropped some 4 per cent against the US Dollar since the start of the year, and fell further after from the European Central Bank’s meeting last month, explained Dunn. It is at 0.93 versus the US dollar currently.
“The decline of the Euro at the start of this year has encouraged people to remit overseas. With the Euro’s fortunes not looking to change anytime soon against the US Dollar, at least anytime this year, remittance rates will continue to stay favourable,” added Trivedi.
However, analysts also widely expect the weakness in the Euro exchange rate to be limited against the US dollar, particularly as ECB is going to have to cut rates later this year. “The rate cuts are highly likely because of recession in Germany, and this can give the US Dollar a bit of a boost as it is a safety currency. And perhaps Germany can claw out of a recession and save the Euro. But as things stand right now, this is what it looks like we’re going to have this year,” Trivedi added.
“In other words, the Euro will stay lower in value, which is being reflected against the UAE Dirham as well. What this means to expats is that it is cost-effective to remit now and take advantage of the current rates.”
Bottom line?
“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 the Pound has fallen to a level not seen for 50 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.”
With the Euro, as remittance trends are not expected to reverse anytime soon, it would mean that it would be comparatively cost-effective to remit soon, similar to the British Pound.