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 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.
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
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.”
Analysts at Dutch multinational bank ING expects 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 1.24 against the US dollar.
“Against the UAE dirham, the pound is expected to slip below its current level of 0.22 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 or be postponed when rates drop further.”
“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 dropping Euro can affect UAE remittances
Against the US dollar, the Euro exchange rate has been 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 1.07 versus the US dollar currently.
“The rise of the Euro this year 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 as the Euro remained under pressure against the US dollar this week and retreated to 6-month lows at 1.06 after a dovish rate hike.”
Analysts at Dutch multinational bank ING expects the Euro rate to be 1.12 within three months, with a forecast of 1.15 in the next six months. However, forecasters at HSBC take a contrarian view, projecting a significantly lower price of 1.02 for the pair by June 2024.
Forex strategists elsewhere widely agreed that the Euro, against the US dollar, will strengthen in a year’s time, but 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
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 September 19, the Euro’s exchange rate was at 0.25, 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.