British expats in UAE rush to move money home as pound tumbles after Brexit shock
British expatriates are ramping up remittances to the UK after the shock Brexit vote as the pound fell to a 31-year low against the dirham on Monday.
Exchange houses and banks reported a spike in demand as soon as the historic result became clear on Friday morning with customers rushing to take advantage of the weakness of sterling.
And with thousands of government workers paid at the end of the month, traders expect even more remittances to be made before the Eid holiday.
The pound continued to fall, slumping about 3 per cent in early trading against the US dollar – against which the dirham is pegged – to US$1.32. It sank 7.98 per cent on Friday to $1.37.
Currency exchange house UAE Exchange reported that the amount of cash passing across its tills increased to eight times the amount it usually sees, while the online exchange service Global Currency Exchange (GCEN), which normally closes on Fridays, opened especially to take advantage of the rush in demand.
“Whilst no one knows at the moment what will happen to the UK economy and how the Brexit will be handled, we do know that this has caused sterling to be sold aggressively, giving a great opportunity to anyone who has a need to buy,” GCEN wrote to its customers on Friday morning. “Moves like this tend to be short lived, as markets tend to overreact to surprise news, so we aren’t expecting to be at these levels for long.”
Promoth Manghat, the chief executive of UAE Exchange agreed.
“A weaker sterling impacted remittances positively,” he said. “The spike in remittances recorded a whopping eight-fold increase compared to our regular average. Meanwhile with summer vacation around the corner, travel season is here. So travellers will tend to buy and stock more of the weaker sterling now for a later use.”
Customers trying to send money back to the UK through some banks reported that they had not been able to do so.
An Abu Dhabi Commercial Bank spokesman said that it had suffered from technical issues over the weekend, but added that they were expected to be resolved on Monday.
“Due to the high impact the announcement has had, volatility across all asset classes has naturally increased,” said Gaurav Kashyap, the head of futures at the foreign exchange and commodity brokerage AxiTrader.
“When there tends to be heightened levels of volatility speculators seek to take advantage of market movement and institutions seeking to hedge their physical exposure also tends to rise. In the immediate aftermath, markets are still dealing with the fallout of the vote from Thursday and markets will remain choppy.”
Exchange houses say that falls in the value of the rupee and the euro since the Brexit decision have also encouraged Indian and European expatriates to send more money home.
Since Thursday the euro has fallen about 3 per cent against the US dollar and the Indian rupee has shed about 1 per cent.
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Updated: June 27, 2016 04:00 AM