Expats in the UAE: Time to send money?Euro stays low, sterling soon slips further

Dubai: When sending money domestically, it is crucial to know if now is the ideal time to send money. To know if it is, you should first figure out whether your country’s currency will rise or fall in the next few days.

Below is an analysis of how currencies such as the British pound and the euro are performing and expected to perform in the coming weeks to help understand whether it is profitable or cost-effective to send money now, or if you should wait a few weeks for better rates.

While the aforementioned currencies are not as volatile as South Asian currencies such as the Indian Rupee, Pakistani Rupee and Philippine Peso, no matter how small a change, it will lead to greater savings in pounds or euros and remittances of more UAE dirhams.

If a currency is expected to weaken or depreciate, it is prudent to take advantage of more remittance-friendly rates after it has fallen further rather than now. On the other hand, for currencies that are expected to appreciate, it will be cost-effective to send money now, as interest rates will only rise in the short term.

“The pound has been on a rollercoaster ride over the past few months, making it difficult to time remittances and overseas transactions,” explained Amit Trivedi, a currency analyst and trader based in the UAE. “But not anymore, given the current interest rates.

“After a year of steady declines, the pound fell to record lows below 1.10 against the dollar, which caused the pound to also fall against the UAE dirham. It fell back to 1.11 after the longest recession since.

However, Wall Street’s biggest banking giant, Goldman Sachs, revealed this week that it had a slightly better view of the pound’s outlook, but added that it was too early to be completely bullish. Goldman Sachs forecasts that sterling will stabilize at 1.18 against the dollar in the next three months, 1.19 in six months and 1.25 in 12 months.

“Given that the currency has been on a downtrend, GBP is widely expected to decline further in the coming weeks. GBP/AED is poised to decline further from the current level of 0.22 in the coming weeks, allowing you to trade way to send money,” Trivedi added.

Trivedi commented that the euro is volatile in 2022 “as investors rush to the safety of the prospect of a European recession amid ongoing conflict in Ukraine, rising borrowing costs and persistently high inflation.”

The EUR/USD exchange rate has been on a steady downward trend over the last year. It started 2022 at 1.14 before rising to 1.2 in early February before falling to a low of 1.0 on May 13 – the lowest level since January 2017. “However, this weakness will lead to an increase in overseas remittances,” he added.

Analysts at US-based lending giant JPMorgan had forecast the euro-dollar exchange rate would hit 1.10 in March 2023 before falling to 1.08 in September 2023 and holding at 1.08 in December 2023. So the tendency to depreciate means better value for money when sending money.

However, currency strategists at rival Morgan Stanley revealed a new euro-dollar forecast of 1.15 by year-end, revising their previous forecast of 1.08. That means remitters need to wait and see, but it’s safe to say the currency is likely to remain at its current lows for now.

The euro remained much stronger against the pound for much of the 1990s and 2000s; but the depreciation of the pound has been a long-term trend since it was allowed to float freely in 1971.

“If you’re only concerned about exchange rates when you’re preparing for a holiday abroad, know that changes in the value of currencies can have wider implications than what you pay overseas,” said UAE’s Anil Pillai. Bank analyst specializing in foreign exchange payments.

“In terms of remittances, it’s important to understand that while sterling has fallen to levels not seen in five decades, it was trading lower against the euro in 2008 at the height of the financial crisis and is still recovering. So , it does improve the prospects for expats to send money.”

When it comes to the euro, however, fortunes may be changing. As of March 13, EUR/USD was trading at 1.0675, up 5.5% over the past six months. If the trend continues, it means it’s now a better time to send money.