UAE residents cash in on weak euro and pound as remittances surge

Exchange houses in the UAE recorded a surge in remittances to Europe after the euro's continued depreciation against the US dollar, offering European residents a window of opportunity to capitalise on favourable exchange rates and send money home. Al Fardan Exchange recorded more than 30 per cent growth in month-on-month remittances by European residents in the UAE in September and double-digit growth year on year. “The Fed rate hike , which caused the euro to dip further, will surely attract more volume of remittances in the coming days and the projected growth outlook for remittance volumes in this corridor is more than 50 per cent,” said Hasan Al Fardan, chief executive of Al Fardan Exchange. “We expect the euro to reach close to 0.9700 by the end of the year. This will be due to a combination of socio-economic, political and global factors resulting from the Fed’s actions to tame inflation .” The euro and sterling both plummeted to new lows after the US Federal Reserve raised interest rates by 75 basis points on Wednesday and signalled more large increases for the remainder of the year. At 12.18pm UAE time on Thursday, the euro was trading at 0.9874 to the US dollar, down about 14 per cent since the start of this year. Sterling was trading at 1.1306 to the greenback, down about 17 per cent since the beginning of 2022. The US Dollar Index hit a fresh 20-year high of 111.63 after the Fed's rate increase. European currencies bore the brunt of selling in foreign exchange markets as Russian President Vladimir Putin’s orders to mobilise more troops for the conflict in Ukraine exacerbated concerns about the economic outlook for a region already hit hard by Moscow's squeeze on gas supplies to Europe , Reuters reported. Customers in the UAE are making use of the decline in major currencies, a Lulu Exchange representative said. “We expect remittance volumes in major currencies to pick up, especially among businessmen and investors who are certain to make use of this opportunity,” the company's spokesperson added. Meanwhile, the Bank of England increased interest rates by 50 basis points to 2.25 per cent at its meeting on Thursday to cope with rising inflation, which now stands near a four-decade high at 9.9 per cent. “Increased spending from the Liz Truss government is not good for inflation, but because the £40 billion [$45.2bn] energy package aims to tame inflation — and it certainly will, the BoE could take it easy on the rate front,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The BoE is also expected to announce quantitative tightening, but the effect of QT will remain under the shadow of huge sums that the Truss government is preparing to spend. On top of the energy spending, there could be £30bn tax cuts, and also a stamp duty cut.” This could result in sterling hitting parity against the US dollar , she said. The BoE has declared it is still willing to fight against all odds and it will only increase interest rates dovishly, according to Naeem Aslam, chief market analyst at Avatrade. "Yes, a 50 basis point interest rate hike is a dovish move. However, the devil is always in details and that is more and more members are thinking of increasing the rates by 75 basis points and this means that the next interest rate hike will still be a mystery," Mr Aslam said. "The BoE has big problems to deal with as a recession is firmly on the cards and this remains in focus among traders who trade the sterling." Al Fardan Exchange expects the BoE base rate to rise above 3 per cent by the end of this year, Mr Al Fardan said. Many factors have contributed to sterling sliding to a new 37-year low against the US dollar, he said. “All these factors will add to a further depreciation in GBP. We expect GBP remittances to increase in coming days.” Lulu Exchange also anticipates a 20 per cent to 25 per cent increase in volumes remitted to Europe as the pound and euro are at historic lows, the representative said. Meanwhile, sterling’s rough ride in currency markets over the past 12 months has made holidays for people in Britain more expensive in 48 out of the 56 most-visited global destinations, said travel money specialists No 1 Currency. The cost of trips to tourist hotspots such as Disneyworld have jumped since the pound lost ground against the dollar. This year, £1,000 exchanged into US dollars would buy $243 less than last year, the company said. Short-haul trips to European countries France, Spain and Portugal are getting more expensive, with sterling losing 3 per cent against the euro, the data showed. “British holidaymakers are having to budget carefully this year amid the double whammy of a cost-of-living crisis at home and a sinking pound abroad,” said Simon Phillips, managing director of No 1 Currency. “Thankfully, there are still some countries where your money goes much further this year than last.” The pound has made gains in eight global destinations in the past year, including Turkey (76 per cent), Sri Lanka (52 per cent), Argentina (22 per cent), Hungary (10 per cent), Japan (9 per cent), Sweden (4 per cent), Egypt (3 per cent) and South Africa (0.2 per cent), No 1 Currency’s data showed.

UAE residents cash in on weak euro and pound as remittances surge

The currencies plummeted to new lows after the US Fed’s 75-basis point rate increase