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 month. But will the currency trend continue?
Estimates show Indian rupee and Pakistani rupee weakening in the weeks to come, while Philippine peso is seen strengthening.
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 weeks and month, 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.
Indian rupee value to dip most by January-end
With the Indian rupee (INR) currently at 20.1 to the UAE dirham, the Indian rupee last strengthened to 74.7 against the US dollar.
The Indian rupee gained by 12 paise against the US dollar on Tuesday, a week after the Indian rupee’s exchange rate slid past the 76-per-US-dollar-mark for the first time since June 2020 and stood at 76.25.
According to research, the Indian rupee is expected to stay at largely the current level against the UAE dirham until the middle of next month, before it ends the month at a low point of 20.8.
So it is financially prudent to remit at the end of next month, as you will get comparatively more Indian rupees for your UAE dirham’s worth than December-end.
These month-end rates are expected to steadily decline from mid-January before falling further by the end of the month, and rising in February, current estimates revealed.
It is known that the Indian rupee has been choppy against the US dollar in the recent past. However, it has been decreased in the last six months on the overall.
The Indian rupee (INR) is set to weaken next year, averaging at Rs76 against the US dollar in 2022, said global ratings agency Fitch Solutions in a new report, while staying over Rs20.7 against the UAE dirham.
Pakistani rupee value also to drop the most by January-end
In Pakistan, the buying rate of the US dollar was currently 178.1 Pakistani rupee (48.49 versus UAE dirham).
According to research, the Pakistani rupee value is expected to drop to 49.3 by the end of January against the UAE dirham, from the current levels. The value will weaken steadily through the month, at one point even touching 50.43 towards the end of the month.
During the last ten days of December, the Pakistani rupee is expected to fall from 49 to 50.3, making month-end the most profitable and cost-effective time to remit.
The currency’s value is expected to stay weak in 2022, ranging between 49.8 and 50.1 by February and March respectively, before the value of the Pakistani rupee plunges even further in the months after.
The Pakistani rupee has been falling against the US dollar in the interbank currency market for months, despite central bank restrictions on imports and its purchase of greenbacks on the open market.
Analysts opine that the Pakistani rupee's downward trajectory is unlikely to reverse in the near future due to a delayed deal with the IMF to raise money through the international bond markets.
Where is the Philippine Peso headed in the weeks to come?
According to research, the value of the Philippine peso is expected to rise to 13.5 against the UAE dirham over the next 30 days – making it ideal to send money over the next coming days.
The rates are expected to steadily drop in January to its lowest point of 13.4. It is expected to turn volatile at the start of next year, ranging between 13.8 and 14.
The average exchange rate against the UAE dirham in December will be 13.73, with the currency staying steady compared to the previous month.
However, as rates are expected to improve during the starting months of next year, it would be more cost-effective to remit at the start of the year, versus now. The Philippine peso, which is currently 13.70 against the UAE dirham, dropped 1 per cent during the last quarter.
From October 2018 to June 2021, the Philippine currency has advanced against the US dollar. For most of 2020, the Philippine peso was on the rise. This 2021, the previous year’s gains were shed off.
From Php47.65 on October 27, 2020, the peso dropped to 50.7426 on July 19, 2021. The Philippine currency lost 4 per cent in the second quarter. It slid further to 51.0291 on September 27, 2021.
There’s a confluence of factors, say economists: stronger dollar, higher liquidity in the Philippine monetary system, low demand from corporate and individual borrowers, coronavirus-driven lockdowns, and higher oil prices, which raises local demand for US dollars, among others.
What are the factors triggering these currency movements?
The value of a country's currency is linked with its economic conditions and policies, and generally depends on factors that affect the economy.
These include factors such as imports and exports, inflation, employment, interest rates, growth rate, trade deficit, performance of equity markets, foreign exchange reserves, macroeconomic policies, foreign investment inflows, banking capital, commodity prices and geopolitical conditions.
Looking ahead the currencies are likely to remain under pressure on rising crude prices and relative strength of the US dollar. Analysts currently evaluate how oil prices could climb higher in the short-term. Oil prices jumped more than 50 per cent this year, with demand outstripping supply.
A possible decline against the dirham is a reflection of the decline of the currencies' fall against the US dollar on which the UAE currency is pegged. However, if the US dollar weakens, which analysts opine looks unlikely, the trends will reverse.
The world's third-biggest oil consumer, India, is concerned about domestic price pressures, with the nation expecting fuel consumption to return to pre-pandemic levels by the end of this year.
In a nutshell, looking at the prospects of the US dollar strengthening, the value of South Asian currencies could experience declines in the months ahead.
