UAE expats, get ready to remit: Indian rupee, Philippine peso to weaken in February

Dubai: Remittances from the UAE were seeing an uptick as several, particularly South Asian currencies, lost a bit of momentum and recorded remittance-beneficial rates in the past few weeks. But will the currency trend continue?

Estimates show Indian rupee, Pakistani rupee and Philippine peso weakening in the weeks to come. Here’s how you can take advantage of these remittance-beneficial rates and when.

Will currency back home rise or fall?

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 the aforementioned currencies have been performing and expected to perform in the coming weeks and month, 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.

Indian rupee value to drop most by mid-February

With the Indian rupee (INR) currently at 20.4 to the UAE dirham, the Indian rupee last strengthened to 75.17 against the US dollar, ahead of the India Budget, 2022 to be held on February 1.

The Indian rupee fell by 18 paise against the US dollar on Tuesday, and by 15 paise in the days that followed. In comparison, the Indian rupee’s exchange rate slid past the 76-per-US-dollar-mark for the first time since June 2020 and stood at 76.25 late last month.

According to research, the Indian rupee is expected to stay pressured against the UAE dirham until the middle of next month when it is expected to touch Dh20.7, before it ends the month at Dh20.3.

So it is financially prudent to remit at the middle of next month, as you will get comparatively more Indian rupees for your UAE dirham’s worth than January-end.

These month-end rates are expected to steadily rise from mid-February to the end of the month, ahead of rising further in March, current estimates revealed.

It is known that the Indian rupee has been choppy against the US dollar in the recent past. However, the volatility has been decreased in the last six months on the overall.

The Indian rupee started the year 2022 on a muted note at Rs74.43 (Dh3.68) against the greenback. The rupee’s new-found strength is attributed by analysts to the US dollar’s weakness, and that’s directly caused by the increased number of Omicron cases worldwide.

Pakistani rupee value to strengthen by February-end

In Pakistan, the buying rate of the US dollar was currently 177.93 Pakistani rupee (48.44 versus UAE dirham).

According to research, the Pakistani rupee value is expected to rise the most to 47.8 by the end of February against the UAE dirham, from the current levels. The value will strengthen steadily through the month and is seen ending the month higher.

The currency’s value is expected to stay weak in 2022, ranging between 48.47 and 48.56 by February and March respectively, before the value of the Pakistani rupee plunges even further in the months after.

The Pakistani rupee has been falling against the US dollar in the interbank currency market for months, despite central bank restrictions on imports and its purchase of greenbacks on the open market.

Pakistan rupee has maintained the downtrend for the past nine months. It has lost 15.68 per cent (or Rs24.71) to date, compared to the 22-month high of Rs152.27 recorded in May 2021.

Where is the Philippine Peso headed in the weeks to come?

According to research, the value of the Philippine peso is expected to rise to 14.3 against the UAE dirham over the next 30 days – making it ideal to send money by the end of next month.

The rates are expected to steadily rise in February to its highest point of 14.3. The value of the currency is expected to drop in the months to come, seen touching lows of 14.6 and 15.3.

The average exchange rate against the UAE dirham in February will be 14.24, with the currency rising by 2 per cent compared to the previous month.

Earlier this month, the Philippine peso dropped beyond 51 per US dollar for the first time since April 2020 amid speculation the nation’s trade deficit will widen as domestic demand improves.

A trade deficit typically also has the opposite effect on currency exchange rates. When imports exceed exports, a country's currency demand in terms of international trade is lower. Lower demand for currency makes it less valuable in the international markets.

The currency is the worst performer in emerging Asia over the past month with a loss of 1.7 per cent against the US dollar. Strategists forecast more losses for the peso in coming months due to the widening current-account deficit.

A seasonal boost from remittances had catapulted the peso as a regional outperformer in the first three weeks of December but those flows have since dwindled. The peso had attempted to breach the 51 level in late September before pulling back.

What are the factors triggering these currency movements?

The value of a country's currency is linked with its economic conditions and policies, and generally depends on factors that affect the economy.

These include factors such as imports and exports, inflation, employment, interest rates, growth rate, trade deficit, performance of equity markets, foreign exchange reserves, macroeconomic policies, foreign investment inflows, banking capital, commodity prices and geopolitical conditions.

Looking ahead the currencies are likely to remain under pressure on rising crude prices and relative strength of the US dollar. Analysts currently evaluate how oil prices could climb higher in the short-term. Oil prices jumped more than 50 per cent last year, with demand outstripping supply.

A possible decline against the dirham is a reflection of the decline of the currencies' fall against the US dollar on which the UAE currency is pegged. However, if the US dollar weakens, which analysts opine looks unlikely, the trends will reverse.

The world's third-biggest oil consumer, India, is concerned about domestic price pressures, with the nation expecting fuel consumption to return to pre-pandemic levels by the end of this year.

In a nutshell, looking at the prospects of the US dollar strengthening, the value of South Asian currencies could experience declines in the months ahead.