European expatriates in the UAE have seen the relative value of their salaries rise by about 20 per cent this year as Europe's debt crisis prompted a slide in the value of the euro and the pound. Foreign workers who are paid in dirhams have benefited from the fluctuating exchange rate between the US dollar, to which the dirham is pegged, and the European currencies. Dirhams buy more euros or sterling than they did at the start of the year.
"For me it's like a salary rise," said Karl Lunz, a 27-year-old Austrian who is working as an operations technician in Dubai. "Although it worries me what is happening in Europe, while I'm out here I will take advantage of the situation." Mr Lunz said he was reassessing his original plan to return home after one year in the UAE because of the favourable exchange rate. Analysts expect both the euro and sterling to continue to fall against the dirham over the next three months as fears persist about the continent's debt crisis.
Currency exchanges in the Emirates have seen an increase in the amount of money being remitted to Europe. Al Rostamani International Exchange branch at Mall of the Emirates in Dubai has seen a 25 to 30 per cent increase in volumes of money transferred to Europe compared with a month ago, said Dilshan Sirimal, the branch manager. "During the last month, because of problems in Greece the currency exchange rate has been good for people as they are getting good value for their currency, whether that's in the UK, Europe or Australia" he said.
Dino Tollieri, a 31-year-old civil engineer from Turin, Italy, was among those using the exchange. "I have transferred more money to my bank account in Italy recently," he said. "It [the lower euro] helps as I have not had a pay rise this year." The euro was near four-year lows against the dollar in currency markets last week. On Thursday it traded at $1.2170 as concerns grew that the EU debt crisis would lead to slower economic growth. The European currency traded at $1.4406 at the start of the year.
The pound was quoted at $1.4555 on Thursday, up from $1.4231 last Sunday, its lowest level in 14 months. At the start of the year the pound was at $1.6221. Emirates NBD expects the euro to slide to $1.15 in the next three months and the pound to $1.40. Suchit Bhatia, a financial analyst at CFB Global in Dubai, said he expected some European expatriates might be waiting to see if the euro went even lower before remitting money home.
"I'm very bearish on the euro and I can see it falling to $1.18 in the coming month or so as I see no good news coming from the euro zone," he said. While European expatriates may welcome a further decline of the euro, UAE exporters are likely to be more worried about the situation. The stronger dollar, and by extension a stronger dirham, means Europeans must pay more for goods and services from the UAE including industrial products such as metals and petrochemicals.
In contrast, the stronger dirham means European goods and services are cheaper for the UAE. tarnold@thenational.ae