Pound vs Euro: UAE money transfers - time it right, save big in October

Sending money from Dubai? Get the best exchange rate, here's how to

Highlights

Against the UAE dirham, the British pound and the euro are expected to strengthen in the coming weeks from its present levels. Here's how you can take advantage of these upcoming rates when remitting money to the UK or anywhere in Europe.

Dubai: Thinking of sending some cash to the UK or anywhere in Europe? Hold on to your dirhams! Just like booking a flight, timing your money transfer can save you some serious money.

The first step is figuring out if the currency in the country you are remitting to is going to rise or fall in value soon? This can make a big difference in how much money your friends or families end up receiving after you send.

Gulf News analysed currencies like the British pound and the euro to see if a money transfer now is a win or a wait-it-out situation. While these currencies are less prone to fluctuations than some South Asian ones (think Indian rupee, Pakistani rupee, and Philippine peso), even small changes can add up to big savings when you're sending a hefty chunk of change.

How do you decide when to remit?
Weakening currency? Wait for the drop! If your home country's currency is taking a tumble, sit tight! The exchange rate will get better as it weakens, so you can send more money later.

Currency on the rise? Send now and save! On the flip side, if your home turf's currency is getting stronger, don't delay! The exchange rate will only go up, so remitting now saves you money in the long run.

British pound to get stronger, remit now!

“The British pound (GBP) or Sterling’s exchange rate has been largely unchanged since the year began, which would have steadily stagnated remittances and overseas transactions,” explained Amit Trivedi, UAE-based forex analyst and trader.

“However, the pound bottoming out against the US dollar exchange rate will soon cause it to rise in value. This will reflect against the UAE dirham as well. With the Bank of England putting rate cuts on hold on Thursday, the pound will briefly stay remittance-friendly before it rises in the coming weeks.”

Another reason analysts are flagging that the pound may soon find more room to rise in value against the US dollar is because the dollar is seen weakening after the US central bank signalled more rate cuts in 2024 and into next year. The pound is currently at 0.75 against the dollar.

“Similarly, against the UAE dirham – which is pegged to the US dollar, the pound value is seen rising from its current level of 0.20, which implies that either you should remit now to avoid doing it when the value rises, to get more value for your dirhams when remitting overseas,” added Trivedi.

What else does a strengthening pound mean for you?
As a strengthening pound won’t help remittances in the near term, the current levels are still favourable to those looking to remit. But what else does such currency weakness mean for your investments and deposits?

“With the British Sterling’s potential rise against the US dollar, investors will soon benefit when investing in UK shares or stocks, which are mostly dealt in the soon-to-be-weak US dollar,” noted Anil Pillai, an Abu Dhabi-based banking analyst specialised in forex payments.

“But those with savings in the UK might finally have something to smile about as fixed-term cash deposits still offer high yields. With the UK economy now having grown strongly for two quarters, markets will soon get more clarity on near-term currency values and forex rates.”

How a stronger euro will hurt UAE remittances

Against the US dollar, the euro exchange rate has dropped in value against the US dollar since the start of the year, but steadied last few months, analysed Pillai. It is at 0.90 versus the US dollar currently. But what will forex rates look like next month?

“The decline of the euro in recent months encouraged people to remit overseas. With the euro’s fortunes to change against the weakening US dollar on account of the US cutting rates more aggressively than Europe, current remittance rates should be taken advantage of before they rise,” said Trivedi.

However, analysts also widely expect that the euro exchange rate won’t rise too much against the US dollar, as more cut rates are eyed in Europe. “Drastic US rates widens the interest rate gap between the US and the Eurozone, but more rate cuts in Europe will put reverse pressure on the Euro versus the dollar,” Pillai agreed, which is in line with the recent forecasts from top investment banks worldwide as well.

“In other words, although the euro will edge up in value, gains will be restricted. This will be reflected against the UAE dirham as well. What this means to expats is that it is cost effective to remit now and take advantage of the current rates,” Trivedi added.

Bottom line?

When it comes to remitting the euro or the British pound in October, as remittance-friendly rates are to reverse, it would be comparatively cost-effective to remit now before rates rise. This should provide UAE-based expats clarity on how they should plan their upcoming remittances to UK or Europe.