Sat, Nov 23, 2024 | Jumada al-Awwal 21, 1446 | DXB ktweather icon0°C

UAE: Should you remit or hold on to your cash when currency hits record lows?

Industry executives suggest that as and when there is a big drop in the currencies, expats should take advantage of it and remit the funds

Published: Wed 23 Aug 2023, 6:01 PM

Updated: Wed 23 Aug 2023, 8:51 PM

Top Stories

Expatriates account for over 80 per cent of the UAE population who remit billions of dirhams every year to their families.

A large number of them hail from Asian countries such as India, Pakistan, Philippines, Bangladesh and Sri Lanka. Of late, these countries’ currencies have weakened against the US dollar and the UAE dirham due to political and economic situations in these countries.

On Tuesday, the Pakistani rupee closed at a record low of 299 against the dollar (81.47 versus the UAE dirham) in the interbank market after the government eased import restrictions, resulting in increased demand for the greenback. Similarly, the Indian rupee also hit a record low of 22.85 against dirham last week. While Philippines peso has seen some weakness, too, against foreign currencies, of late.

With currencies hitting new lows, many UAE expats wonder whether they should remit now to take advantage of better exchange rates or hold onto their funds, hoping for a further drop in the currencies.

Industry executives suggest that as and when there is a big drop in the currencies, expats should take advantage of it and remit the funds. “It’s because the central banks usually intervene to support their currencies when they plunge, hence they rebound. Therefore, we advise UAE residents not to wait much and make the most of the drop and remit the funds,” said an industry player.

Similarly, when the currency hits an all-time low, residents should remit to earn more cash, he said.

Importantly, the amount expats intend to remit should also be big because smaller amounts don’t make much of a difference.

“We advise people who plan to send large funds to buy properties, invest in businesses or for any other purpose to keep an eye on major political and economic announcements in their home countries because they influence the currencies. Therefore, they should take a call to remit funds accordingly to earn better exchange rates,” said another executive.

However, if the political and economic situation of the home country is too volatile, then UAE should expats can wait and hold the funds because there is a high chance that the currency go down further during the volatility. For instance, the Pakistani currency has plunged by nearly 28 per cent from 59 to 81.77 this month and its outlook is also bleak due to ongoing political and economic turmoil in the country.

“Given the record low of the Pakistani rupee and the current eased import restrictions boosting demand for the dollar, expats should consider holding from remitting their earnings home. The projected range of 295 to 305 against the greenback (equivalent to about 80 to 84.30 against the dirham) is suitable for remittances. However, it's important to note that any potential future import restrictions or reduced political tension could lead to a reversal of the rate hike,” said a Lulu Exchange spokesperson.

Vijay Valecha, chief investment officer at Century Financial, said the depreciation of the Pakistani currency presents an opportunity for expats to remit money. “A weaker currency will facilitate the transfer of more money to Pakistan without expats having to fork over extra funds in their host country. Moreover, for a country battling with a cost-of-living crisis, remittances can go a long way in supporting families back home,” he added.

ALSO READ:



Next Story