Highlights
Against the UAE dirham, the British pound is expected to slip from its present level of 0.21 in the coming weeks, with the Euro expected to keep steady at its current level of 0.25. Here's how you can take advantage of these upcoming rates.
Dubai: 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 currencies like the British pound and the euro have been performing and expected to perform in the coming weeks, 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.
Although the above-mentioned currencies don’t fluctuate as much as South Asian currencies like the Indian rupee, Pakistani rupee and Philippine peso, however small the changes will result in bigger savings the more money you remit.
If a currency is expected to weaken or depreciate, 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.
Sterling’s exchange rate has been on a downward trend since the year began, which would have encouraged remittances and overseas transactions
British pound to get stronger or weaker?
“The British pound (GBP) or Sterling’s exchange rate has been on a downward trend since the year began, which would have encouraged remittances and overseas transactions,” explained Amit Trivedi, UAE-based forex analyst and trader.
“After a period of steady decline, the pound to US dollar exchange rate is currently closer to the bottom-end of the historical trading range, which caused it to drop against UAE dirham as well.”
Jane Foley, Dutch multinational bank Rabobank's currency strategist, noted that the GBP is set to lose some of its strength against the US dollar, before edging back to 1.26 over the next three months and gain even more to 1.22 in six months. The pound is now at 1.28 against the US dollar.
“Against the UAE dirham, the pound will slip below its current low level of 0.21 in the coming weeks, enabling you to cost-effectively remit in the days to come,” added Trivedi. “Given that the currency will rebound soon after, remittance plans will be postponed to weeks after it rises.”
“Because of sterling’s fall against the dollar, UK investors now might not be the best time to invest reduced pound in shares or global stocks, which are mostly dealt with in US dollars,” noted Brody Dunn, an investment advisor at a global wealth management firm.
“However, 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.”
How a rising Euro can affect UAE remittances
Against the US dollar, the Euro exchange rate has rising over the past several months after a turbulent 2022, on the back of improved sentiment over the European Union, as well as the slowing of interest rate hikes by the US central bank, noted Dunn. It is at 1.09 versus the US dollar currently.
“This has reduced the greenback or dollar’s appeal as a safe haven and such weakness would discourage people from remitting overseas. However, the euro’s fortunes may be changing. For the last 12 months, the exchange rate has been up 6 per cent.”
Analysts at US-based Bank of America (BoA) are more optimistic and believe that the Euro will strengthen against the US dollar in 2023. Economists widely expect the Euro to strengthen to 1.10 by the end of 2023, and set to reach 1.15 by the end of 2024.
Forex strategists at US-based research firm Trading Economics agreed that the Euro, against the US dollar, will trade at current levels in a year’s time – levels of strength seen reflecting against the UAE dirham as well. What this means to expats is that remittances should not postponed any longer.
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
Bottom line?
The Euro is still much stronger than it was against the pound in the 1990s and for most of the 2000s; but the pound’s depreciation is a long-term trend since it was allowed to float freely in 1971.
“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 Sterling has fallen to a level not seen for fifty 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.”
When it comes to the Euro, however, trends may be reversing. As of June 6, the Euro’s exchange rate was at 0.25, against the UAE dirham. If this trend continues, it would mean that it would be comparatively cost-effective to remit now.
