Will expats in UAE remit? Indian rupee, Philippine peso to rise, but Pakistani rupee to drop

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?

Not for all currencies. The Indian rupee and the Philippine peso is expected to rise in the coming weeks, while the Pakistani rupee is expected to weaken. Here’s how you can take advantage of these remittance-beneficial rates and when. Check the latest forex rates here.

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 week, 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.

If a currency is expected to weaken or depreciate, like the above-mentioned currencies in this instance, it's prudent to take advantage of more remittance-friendly rates after it drops further, rather than now. On the other hand, when it comes to currencies that are expected to appreciate in values, it would be cost-effective to remit now, as the rates would only rise over the near term.

Indian rupee value to rise more soon, remit soon

Down over 10 per cent against the dollar this year, the rupee will trade at 82.5 per dollar in three months, according to the October 28 to November 1 Reuters poll of 26 forex analysts. For now, in the coming week, the currency is seen at around 81.50-81.55 per dollar, largely steady compared to recent levels.

Any weakness or strength in the Indian currency's value against the US dollar will be automatically reflected in its exchange rate with the UAE dirham as the UAE currency is pegged to the dollar. Against the UAE dirham, the Indian rupee is expected to rise to 21.78 by mid-December, so remit soon to take advantage of rates.

If the rupee hits 85 to a dollar by December, it would have lost 12.5 per cent this year - the steepest decline in a decade. While the Reserve Bank of India has stepped in regularly to smoothen the rupee's drop, analysts said the intervention is depleting the foreign exchange pile at a robust pace.

India's rupee will recoup only some of its recent losses against the dollar over the coming year as the interest rate gap is set to widen further alongside a worsening current account deficit, according to a Reuters poll of FX strategists.

The currency has declined in every month this year - its longest losing streak in almost four decades - as the US Federal Reserve has adopted far more aggressive policy tightening than its peers, including the Reserve Bank of India, boosting the greenback to two-decade highs.

In the coming week, however, the Indian rupee is expected to decline against the US dollar, tracking a broad decline in Asian currencies on concerns that US interest rates would remain high for longer. While it is highly likely that the US will opt for small sized rate hike in December, a few economists expect a higher peak rate.

Goldman Sachs said it is adding another 25 basis points (bps) rate hike to their peak Fed fund rate forecast. It expects a 50 bps hike in December and 25 bps hikes each in February and March, and has now added a 25 bp hike in May.

"This raises our forecast of the peak fed funds rate to 5-5.25 per cent (vs. 4.75-5 per cent previously and a 4.9 per cent peak in market pricing)," Goldman Sachs analysts wrote in a note. US data out on Wednesday supported the possibility of a higher peak rate.

Pakistani rupee to drop more, hold on remittance

In Pakistan, the buying rate of the US dollar was currently 222.13 Pakistani rupee (60.47 versus UAE dirham).

According to research, the Pakistani rupee value is expected to drop the most in value to 61.63 by the middle of next month against the UAE dirham. So hold off on remitting till then.

Pakistani rupee on Thursday depreciated by 25 paisa against the US dollar in the interbank trading to close at Rs222.66 against the previous day's closing of Rs222.41.

According to the Forex Association of Pakistan (FAP), the buying and selling rates of the US dollar in the open market were recorded at Rs227.25 and Rs229.5 respectively.

Philippine peso value to rise more soon, remit now

According to research, the value of the Philippine peso is expected to rise to 15.20 against the UAE dirham by the middle of next month - making it more cost-effective to send money now. Against the UAE dirham, the peso was currently at 15.60. The peso slid more than 12 per cent this year against the dollar.

The Philippine peso, Southeast Asia's worst performer this year, rose 0.2 per cent against the dollar after BSP delivered a previously announced 75-basis-point key rate increase on Thursday. The currency has gained more than 2 per cent this quarter, paring this year's losses.

The Philippine central bank will have to raise interest rates if the US tightens policy further to support the peso and prevent the currency's weakness from further stoking inflation, its governor said on Friday.

Bangko Sentral ng Pilipinas has raised interest rates by 300 basis points this year to curb inflation, running near 14-year highs, and support the peso which has fallen sharply against the dollar, underpinned by aggressive US monetary tightening.

The Federal Reserve is expected to deliver a smaller rate hike in December, but economists polled by Reuters see a longer period of tightening and a higher policy rate peak as risks to the current outlook.

"If the Fed does 50, we cannot have zero right? So the question is whether it's 25 or 50," BSP Governor Felipe Medalla told Reuters in an interview in Manila.

"If you have a scenario (where) the Fed will not hike any more then I can tell you flat out, neither are we." BSP raised interest rates by 75 basis points on Thursday, largely to match the Fed's three-quarter point hike this month, and is expected to hike again in December.

- with inputs from Agencies