Stronger US Dollar boosting remittances sent by UAE expats

With the US Dollar forecasted to increase in strength this year, expatriates throughout the UAE should see their remittance value be substantially increased.

Amidst the ongoing devaluation of the Chinese Yuan, the United States has recently announced strong indicators of employment growth as the economy boosts the greenback against other currencies.

Promoth Manghat of the UAE Exchange explains, “The ripples of the Chinese currency fall will stay around for some more time and this could lead to fresh imbalances in economies across the world.”

Sudesh Giriyan, COO of Xpress Money, indicated “The US dollar will continue to be stronger – one, because the overall sentiment of the US economy is very positive if you look at various indicators including the drop in the percentage of joblessness.”

In response to the rising US Dollar, several emerging market economies from Asia have seen their currency enter alarming levels of decline. The Indian Rupee, Philippine Peso, Bangladeshi Taka, Pakistani Rupee, Indonesian Rupiah and Malaysian Ringgit have all been negatively affected by recent foreign exchange movements, sending many of such currencies to record-breaking lows.

Giriyan illustrated, “We believe that the US dollar is on a strong wicket. Closer to home, the fall in the value of South Asian and Southeast Asian currencies have also widened the gap with the US dollar which is at a higher perch.”

Giriyan then stated how the Chinese Yuan also played a major role in the decline of such currencies, highlighting how there is a “correlation between the currencies of all economies.” Manghat explains, “We believe the ripples of the Chinese currency fall will stay around for some more time and this could lead to  fresh imbalances in economies across the world, which in turn will strengthen the dollar.”

For expats residing in the UAE, a higher value US Dollar would bring welcome benefits to even those who transfer Dirham-based funds towards their home nations. Expats in the UAE have traditionally been classified as considerable money remitters, sending an estimated of DH106 billion during 2014 – the third highest in the world, after Kuwait and Qatar.

The UAE Dirham is currently pegged to the US Dollar, allowing it to ride upon the saddle of the greenback’s performance. In result, those who earn in Dirham would only benefit from an increasing valuation of the US Dollar.

Furthermore, the US Dollar is expected to strengthen even further as John Hardy, head of foreign exchange strategy at Saxo Bank, is convinced that the US Dollar-Japanese Yen pair is poised to rise to more than 130 during the next few months. Hardy also stated how the Sterling to US Dollar will eventually reach 1.50, whereas its comparison to the Euro will gradually be set at 1.00.

It must be noted however, that Hardy’s assumptions are based on the chance that the global markets eventually recover from the current turbulence, specifically highlighting how China should implement more reasonable, steady measures in devaluating its currency and in how the US Federal Reserve indeed proceeds with increasing its interest rates.

With offices in both Dubai and Abu Dhabi, Acuma is a leading independent financial advisory firm in the Middle East. We specialize in catering to the financial needs of expats and foreign investors with services such as retirement planning, pension planning, insurance, education planning, investments and general wealth management advice.

Our highly trained financial advisers are dedicated in securing your finances. These advisers are able to meticulously and delicately assess your personal finances as a means to help facilitate the most appropriate solution to your specific requirements.

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