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Al Ansari money exchange, Dubai. Image Credit: Photo Virendra Saklani/Gulf News

Dubai: Remittances from the UAE are seeing a surge as several, particularly South Asian currencies, were losing ground in the past weeks. But will remittance-beneficial currency trend continue?

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.

According to statistics, South Asians, which – among others – include people from India, Pakistan and the Philippines, and make up nearly 60 per cent of the UAE population. So, it would be financially beneficial to regularly analyse currencies of the above countries, be it – the Rupee or the Peso.

Here is an analysis of how these aforementioned currencies have been performing and expected to perform in the coming weeks and months, 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.

Will the Indian Rupee drop in May?

With the Indian rupee currently at 20.17 to the UAE dirham, the Indian rupee last weakened to 74.1 against the US dollar.

According to research, the Indian rupee is expected to drop to Rs19.85 by the middle of the month against the UAE dirham, before rebounding back strongly by the end of May. So it is financially prudent to hold onto your dirham and avoid remitting just yet, if you are looking for better rates.

Moreover, these rates are seen persisting in June and July, dropping to as much as Rs20.39, and as high as Rs20.65.

During the rest of 2021, analysis indicates that rates will stay between Rs.20.57-Rs21, indicating that the coming months will be the most cost-effective time to remit, when compared to the remainder of the year.

Pakistani Rupee seen dropping in the coming weeks

In Pakistan, the buying rate of the US dollar was 153.9 Pakistani rupee (41.9 versus UAE dirham).

According to research, the Pakistani rupee is expected to drop to Rs41.6, from the current Rs41.9 against the UAE dirham, before rising to Dh42 for the rest of May. However, rates will drop to as low as Rs41.4 in the first week of June.

During the last two weeks of May, the Pakistani Rupee will mostly average between 41.9 and 42, making it an ideal and profitable time to remit.

Global ratings agency Fitch Solution predicts the Pakistani currency to average weaker at Rs171.15 for every US dollar in 2021, citing higher structural inflation in the US.

Where is the Philippine Peso headed in the weeks to come?

According to research, the Philippine Peso is expected to average between 13.03-13.11 against the UAE dirham over the next one month, with no major fluctuations seen – making it ideal to send money any time over the next coming weeks.

The average exchange rate against the UAE dirham in May will be 13.06, with the currency slipping just 0.5 per cent in the month. Over the month of June, rates are expected to drop at the end the month while the exchange rate averages at 12.99.

However, during the following months of July and August this year, rates are expected to drop to about 12.91-12.85. So, it would be cost-effective to remit during the preceding months. The Philippine Peso, which is currently 13.13 against the UAE dirham, dropped 1 per cent during the last quarter.

What about other South Asia currencies?

Sentiment towards currencies of export-focused nations with lower COVID-19 cases improved the most, while expectations of the Indian rupee falling, rose sharply as COVID-19 cases surged in the country.

As a result, investors have pulled out of the greenback, sending it to multi-week lows. Asian currencies strengthened as a result, benefiting from a slide in the US dollar to a near nine-week low.

"I believe what we are seeing is a relief rally in Southeast Asian currencies. This could continue. Only time will tell what will happen between growth and inflation," said Daniel Dubrovsky, a strategist at IG's DailyFX.

Long bets on the Japanese yuan stood at their highest in nearly two months, as China's economic recovery quickened sharply in the first quarter from last year's coronavirus slump, led by exports.

Bullish positions (betting on value to rise) for the Singapore and Taiwanese dollars, were at their highest since early and late February, respectively, as exports data painted pictures of strong growth.

Short bets on the Thai baht persisted as the nation struggles with a new coronavirus wave that includes a highly transmissible variant, and faces a shortage of vaccines, with no recovery of its important tourism industry in sight.

Verdict: Peso’s outlook is strong, Indian Rupee view dims

Long positions by forex traders (purchasing currency with the expectation it will increase in value – a bullish attitude) on the Philippine peso were at a more than two-month high, as data showed the country's trade deficit shrank in February while remittances, an important source of dollars to the country, grew after months of declines.

Bearish bets (expecting value to drop) on India's rupee climbed to their highest since last April, as a virus surge halted what was recently seen as a promising growth story in the region.

Markets were aggressively pricing in hawkish Reserve Bank of India monetary policy expectations too, which unwound after the central bank revealed at its policy meeting this month that it was still dovish (it is unlikely that they would take agressive actions), DailyFX's Dubrovsky said.

"So combine this with surging COVID-19 cases and prospects of tightening look increasingly grim, leaving the rupee vulnerable in the near term," Dubrovsky said.