Earning in dirham: foreign exchange update from Argentex

Earning in dirham: foreign exchange update from Argentex

Islay Robinson

With the recent currency volatility it’s been difficult for those earning in the Emirates to know what to do. We’ve seen the currency pair move as much as four percent in the last few weeks, which can make a dramatic difference to those repatriating earnings over the course of the year.

The major concern for those sending money home is that many top-tier banks and brokerages are forecasting the pound to appreciate, making it more costly to send money home. This means that ultimately expatriates will receive less sterling for their dirhams. There are risks to both sides of the market, from the pound side, we have a potential interest rate hike on May 10th which would be pound positive. On the downside however, any potential gains could be limited by the ongoing Brexit saga.

In addition, the most recent comments from the Bank of England have put doubt in the markets that there will in fact be a rate rise given recent disappointing data. The dirham will be driven by US central banking policy, with a potential of three further rate raises this year, we could see the dirham appreciate markedly.

Chris Canning, head of private clients at Argentex comments: “With so much unpredictability in the UK, for those looking to ultimately buy GBP it’s important to take opportunities as they arise. Individuals looking to convert AED into GBP will often delay in making their transaction in the hope that sterling will weaken further rather than accepting the rate where it is. A measured and sensible approach is often to convert the funds in stages, taking advantage of a trend in the client’s favour, whilst also protecting at least some of the funds in case of a sudden negative move. Another option for clients’ is to enter into a forward contract.

This is particularly useful for those private clients who do not have the AED available yet but would like to take advantage of a preferable exchange rate. This involves locking in a current exchange rate to use on a date in the future giving the client complete assurance of the rate. It is important to note that it is impossible to predict where the exchange rates are going to go as the markets are unpredictable, however using a reputable currency broker allows you to be fully informed to make educated decisions when executing foreign exchange transfers.”

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