European expats in the UAE may start to feel a little bit richer soon if predictions by Goldman Sachs’s chief currency strategist prove accurate.
Robin Brooks predicted the US currency will appreciate 5 per cent to $1.25 per euro within six months. That puts his estimate among the highest in a survey of more than 60 analysts.
Goldman Sachs is even more upbeat for the long term, forecasting the dollar will strengthen to $1.20 per euro in a year and to parity by late 2017. The median forecast of analysts surveyed by Bloomberg is $1.28 by the second quarter of next year and $1.26 in 2017, from the current level of about $1.303.
Professionals from Europe have been flocking to the UAE in recent years amid high unemployment rates and uninspiring economic growth back home, although this has come at the cost of a strong euro. And because the UAE dirham is pegged to the US dollar, it has meant that Europeans living and working in the UAE have had to pay more to finance things such as mortgages or holidays back home.
That may soon change as the US economy strengthens and the Federal Reserve reduces the amount of money it prints, and possibly starts to raise interest rates.
Unlike Europe, where the European Central Bank has started penalising banks that deposit cash with them and continues to cut interest rates and provide large doses of financial stimulus, the Federal Reserve has been tapering the amount of bonds it buys each month, with economists predicting that interest rates may start to rise next year as employment and other economic indicators improve.
mkassem@thenational.ae
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