Expats must watch dollar to rupee rate

Dubai: Indian expatriates in the UAE can benefit from a strengthening of the dollar against the rupee, and would do well to monitor the exchange rate when sending remittances home, analysts say.

This principle also applies to other expatriates working in this region, where the currencies are pegged to the US dollar.

"If the dollar is going to get stronger six months from now, I think a lot of people will and should use that opportunity to postpone until then the outflow of remittances from, for example, the UAE to India," Dilip Ratha, lead economist in the World Bank's Development Prospects Group, told Gulf News in an interview.

For some, the strong dollar last year created an incentive to send more funds home for investment purposes.

"Remittance flows to some South Asian and East Asian countries increased sharply in 2008 partly because depreciating currencies against the US dollar made assets in the home country more attractive, with a 'sale effect' resulting in a shift in remittances from consumption motives to investment motives," stated a report from the World Bank.

According to Sudhir Kumar Shetty, chief operating officer of the UAE Exchange Centre, the Indian currency's exchange rate against the dollar is about 20 per cent below its level of last year. As a result, UAE dirhams can buy more rupees since the dirham is pegged to the dollar.

George Naufal, Assistant Professor at the American University of Sharjah, who specialises in remittances, expanded upon this: "It would not be reasonable to assume that the pegging of the dirham to the dollar does not have an effect on the remittances from the UAE. Having a fixed rate is comforting for expatriates who can plan their budget ahead of time.

"Expatriates in the UAE get paid in dirhams and therefore when they remit, they usually exchange money into their local currencies which eventually affects the amount remitted."