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Gulf expats feel dollar pinch
Expatriates working in the Gulf are feeling the pinch as the euro and UK pound reach near all-time highs against the depreciating US dollar.
With all but one of the GCC currencies pegged to the US dollar - which has hit a 26-year low against UK sterling - many see this as a time to save money locally rather than send it home.
Yesterday the pound sterling stood at $2.0151 after hitting a 26-year peak of $2.0197 against the dollar in early trading hours. And the euro was trading at $1.3611, nearing its all time record high in April. Today, the European currencies soared even higher.
"We expect the dollar to weaken in the near term [and] that could apply further pressure on the regional currencies," Steve Brice, a Standard Chartered economist, was quoted as saying in yesterday's Gulf News.
"While we expect Kuwaiti dinar to appreciate by 0.35% in the third quarter, we do not anticipate other GCC countries including the UAE to make any change in their exchange rates in the short term," he added.
All of the GCC countries peg their currencies to the dollar except for Kuwait, which dropped its peg in favour of a basket of currencies in May to counter the weakening dollar and soaring inflation.
The UAE central bank has repeatedly said it is committed to maintaining its peg to the dollar, in accordance with a decision by Gulf leaders to prepare for monetary union in 2010.
Meanwhile increases in the value of foreign currencies like the pound sterling mean rising import costs, hitting the region's residents and its expat communities.
ArabianBusiness.com has also spoken to expatriates who plan to delay sending money home in the hope that exchange rates move in their favour.
"It's time to pay the credit card off here, rather than send money home," said one UK national resident in Dubai.
"One of the reasons that people come to Dubai is to save money," another British expatriate said. "But with exchange rates going through the roof and banks here charging loads of commission to transfer money to overseas banks, it is getting more and more difficult. It's like you're actually paying the tax you think you are saving by working out here."
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Comments 1-4 of 4
Posted by Danny Woodring, USA on 10 July 2007 at 09:00 UAE time
I see all the comments about everyone but the Americans. We are actually double hit because of the new expat tax laws plus the weak dollar. Because we are American everyone thinks we are rolling in money. The British and other nationalities do not suffer the same tax issues. The American expats money has been reduced by 50% based on the current Gulf inflation rate and the new tax laws.
Posted by AZAD, Al Khuwair, Oman on 8 July 2007 at 12:00 UAE time
I truly agree with Mr. Nitin as he very clearly mentioned on the way Indians are suffering because of the exchange rates. It really makes no sense today coming all the way to Gulf to make some money. India is booming so are the salaries offered. Many companies are offering much more pay packages compared to any other Gulf countries. And as mentioned in the article, I strongly feel the major sufferers are the Indian Community as they are one of the largest in numbers in the Gulf countries.
Posted by annoymous, Abu Dhabi, India on 8 July 2007 at 09:00 UAE time
This is the truth, Indians are losing a lot, specially with the rupee rate going higher during the salary time for the poor man to send money to his families back home, and all the rates increasing economically, people cannot afford it, there is very little scope now for the Asians specially Indians. It is disheartening to see how things are becoming more expensive.
Posted by Nitin, Dubai, UAE on 5 July 2007 at 08:00 UAE time
Why only British and Europeans. I think worst hit expat community is Indian. On one hand weakening dollar is increasing inflation which in turn is reducing dirhams saved and on other hand whatever you save is not resulting into desired amount of savings back home. I personally feel working in middle east is no longer lucrative due to increasing rents, rising inflation, adverse exchange rates etc. it’s certainly not lucrative at all for new comers from countries like India where economy is booming like anything and pay packets going up substantially.