Dubai: Remittances from the UAE were seeing a marginal uptick as several, particularly South Asian currencies, lost a bit of momentum and recorded remittance-beneficial rates in the past week. But will the currency trend continue?
Estimates show Philippine peso, Indian rupee and Pakistani rupee weakening in the weeks to come.
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 mid-December
With the Indian rupee (INR) currently at 20.28 to the UAE dirham, the Indian rupee last strengthened to 74.5 against the US dollar.
Last week, the Indian rupee fell by 15 paise against the US dollar on Thursday and depreciated by 12 paise against the US dollar on Wednesday as a firmer US currency weighed on sentiment.
According to research, the Indian rupee is expected to drop to 20.42 by the start of next month against the UAE Dirham, before it ends the month at 20.43. However, it is expected to touch 20.49 by mid-month, dropping the most then.
So it is financially prudent to remit at the middle of next month, as you will get comparatively more Indian Rupees for your UAE Dirham’s worth than November-end.
These month-end rates will stay low in December before falling further in January at 20.63, and even further in February at 20.98, 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 currency exchange depends on economic performance, inflation, interest rate differentials, and capital flows, etc.
It is generally determined by the strength or weakness of the particular economy. Hence, currency exchange fluctuates dynamically. The currency exchange rates of a country is considered as crucial element for central banks to set up a monetary policy.
Even though the dollar-rupee has not been able to cross 74.55, the way the dollar index has risen, analysts see it rising towards 75 levels and above with the year-end approaching.
Pakistani rupee value also to drop the most by mid-December
In Pakistan, the buying rate of the US dollar was currently 175.41 Pakistani rupee (47.76 versus UAE dirham).
According to research, the Pakistani rupee value is expected to drop to 48.62 by the middle of December, from the current 47.76 against the UAE dirham. The value will strengthen before steadily rising through the month, before ending the month at 47.68.
During the last two weeks of December, the Pakistani rupee is expected to fall from 48.57 and 47.68, making mid-month the most profitable and cost-effective time to remit.
The rates are expected to rise by the end of December, and drop back to the current level in January, 2022, ranging between 47.05 and 47.35 respectively, before the value of the Pakistani rupee plunges in February, 2022, by Rs1.30.
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 Philippine peso is expected to steady at 13.6 against the UAE dirham over the next 30 days – making it ideal to send money over the next coming weeks.
The rates are expected to drop in mid-December to 13.89, before rebounding by the month-end to current levels. It is expected to turn volatile at the start of next year, ranging between 13.52 and 13.92 respectively.
The average exchange rate against the UAE dirham in November will be 13.70, with the currency falling 0.3 per cent in the month.
However, as rates are expected to fluctuate during the starting months of next year, it would be more cost-effective to remit by mid-December. 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.
The value of a currency generally depends on factors that affect the economy 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.