Euros woes payoff in dirhams
With some analysts predicting euro-dollar parity by the first quarter 2011, expats in the UAE are anticipating a handsome payoff when it comes to sending cash home.
June 10, 2010 5:27 by Katherine Azmeh
If you’re looking for the yin and yang of the downward-spiraling euro, how about this? It’s a great time to be from the euro zone – as long as you’re working in the UAE. In real terms, European expatriates who receive their salaries in dirhams have already realized a tidy 20 percent rise this year on the sliding euro.
With the dirham pegged to the dollar, salaries paid in the local currency have gained increasing strength against Europe’s common currency, which slid to its lowest level in more than four years this week, touching just over 1.18 dollars.
“I’m certainly worried about the UK’s economy,” said Andrew Flanders, a 30-year-old financial analyst from London, working in Dubai. “But there are always financial opportunities in times of economic gloom, and this is one of them,” he added.
But some analysts see different patterns emerging as expats in the region decide what to do with their newfound wealth. At currency exchange outlets in Dubai, some note that Indian expat workers are quicker to take advantage of the declining rupee than their European counterparts.
“Recently, we’ve seen a surge in the amounts sent home by Indians,” a manager at Al Rostamani Exchange told Emirates Business.
“ After dropping slightly, the Indian rupee was 12.37 to a dirham late last week, and we saw a lot of remittances to India. But there has been no such trend as far as the euro is concerned,” he added.
The reasons for the discrepancy are probably numerous. Some Europeans in the UAE may be waiting for the euro to bottom out, holding out for a bigger payday. In an interview earlier this week with CNBC, currency strategist Chin Loo said she sees various factors at play that will drive the euro down to the 1.1 level within the next quarter. And BNP Paribas forecasted last month that the euro will fall to parity against the dollar by the first quarter of 2011. In the latter case, those expats holding their local currency still have a lot of profit potential remaining.
Others may feel less urgently responsible for family at home, and may be slower to capitalize on the opportunity. “We have not seen any increase in the amount of money being sent to the euro zone from the expat community here,” one unnamed official told local media.
For local merchants, this is probably welcome news, as cash-rich European expats may feel a bit freer to spend a little more here, in light of their real increase in buying power at home. Just one more upside to a downed euro.