Against the UAE dirham, the British pound and the Euro are expected to slip from its present levels in the coming weeks. 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 when you remit more money.
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.
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
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. While it initially tried to rise on Wednesday, it gave back gains to show signs of more declines.”
Analysts widely expect the pound rate to be 1.27 within three months with a 12-month forecast of 1.34, attributing the drop in value to the US dollar coming under pressure. The pound is now at 1.21 against the US dollar.
“Against the UAE dirham, the pound is expected to slip below its current level of 0.23 in the coming weeks, enabling you to cost-effectively remit in the days to come,” added Trivedi. “Given that the currency will stay weak even in the months after, remittance plans will likely stay in place.”
“Because of sterling’s fall against the dollar, now might not be the best time to invest the 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 dropping Euro can affect UAE remittances
Against the US dollar, the Euro exchange rate dropped for the second consecutive day, falling below 1.06 due to a stronger US Dollar, noted Dunn. It is at 1.05 versus the US dollar currently.
“The rise of the euro this year has discouraged people from remitting overseas. However, the euro’s fortunes may be changing as the euro remained under pressure against the US dollar this week and is expected to stay that way for now,” he added.
Analysts at investment banking major JP Morgan expect the euro exchange rate to stay weak for now against the US dollar, but hold at 1.08 in December. Forex experts elsewhere widely agreed that the euro, against the US dollar, will strengthen in a year’s time.
However, the currency will stay weak running up to such levels. This is seen reflecting against the UAE dirham as well. What this means to expats is that remittances should not be postponed for long.
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
“If you concern yourself with exchange rates only when you’re about to head off abroad on a 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 October 26, the euro’s exchange rate was at 0.26, against the UAE dirham. If trends reverse, as it is widely expected to, it would mean that it would be comparatively cost-effective to remit now. The same applies to the British pound.