Dubai: Outgoing remittances from the UAE surged on Wednesday as the US dollar strengthened against other major currencies including the pound sterling.
The greenback has been on a winning streak against the British pound, Indian rupee, Philippine peso and other currencies, enabling UAE expatriates, whose dirham earnings are pegged to the US dollar, to send more money home.
The UK currency dropped to its lowest level against the greenback on worries over the outcome of the upcoming Brexit negotiations, pushing expats’ remittance power higher.
As of Wednesday, a dirham was equivalent to 0.224 British pound, up 1.8 per cent from 0.22 in the beginning of the year. At the same time, one dirham stood at 13.53 Philippine pesos and 18.56 rupees, up .31 per cent and .35 per cent, respectively.
The surge in dirham’s value prompted expatriates to make a dash for the nearest exchange house, causing remittance transactions to Europe alone to jump by 25 per cent.
“The sterling fell to its lowest level against the dollar yesterday,” noted Promoth Manghat, CEO of UAE Exchange Group. “We have always witnessed a spike in remittances when the major currencies weaken against the US dollar. Yesterday was no different, as we saw remitters cashing on the favourable exchange rate and remitting to UK and Europe.”
“Our operations in the UAE reported an increase of 25 per cent in remittances to Europe, a sharp rise as compared to a regular day of the week,” added Manghat.
Raghu Mandagolathur, senior vice president for research at Markaz, said that since the UAE dirham is pegged to the dollar, a rise in the value of the American currency would mean that the remittance value would also go up.
“While low oil price has impacted remittance from the UAE (according to the World Bank) on account of lower earnings, a stronger dollar would negate the impact to a certain extent,” he told Gulf News.
Mandagolathur, however, cautioned that a stronger dollar would mean higher import costs. “Since the UAE depends on imports for most of the local consumption, a rising dollar would also signify an increasing import cost, thereby reducing the purchasing power.”