Currency Crunch: Hard-Up Dirham

Currency Crunch: Hard-Up Dirham
By Derek Baldwin, Jay B. Hilotin and Subramani Dharmarajan, Staff Reporters GULF NEWS

Expatriates say the weak dirham means they will have to stay working in Dubai longer than they had planned to shore up savings.

Hopes of an imminent revaluation of the dirham faded this week after Gulf leaders declined to discuss the weakened US dollar.

The Central Bank also warned money changers and hotels this week not to exchange dollars at less than the usual rate of the dirham.

It’s anyone’s guess, meanwhile, where the dirham rate will go in the near future as expats and financial officials wrestle with up to 24 per cent losses on the dirham as a result of its long-time peg of 3.6725 to the US dollar.

Less Purchasing Power

Ronald Simmonds is a Canadian lawyer who moved to Dubai in 2006 with his wife and two children with hopes of earning a high income.

However, Simmond’s Dubai savings account ledger is disappointing to say the least, he told XPRESS, because the dirhams that he sends home every month have less purchasing power to buy Canadian dollars.

Simmonds, 38, had instructed his local bank to automatically transfer Dh10,000 a month to his Canadian investment fund but has stopped doing so because he was losing more than Dh1,500 when the money was exchanged.

"We’re hanging on to our dirhams now until we see where they are headed against the US dollar," said Simmonds

"To take this kind of hit every month really hurts our future when you add it up over the long term."

For the moment, Simmonds said he is banking his money here in the UAE until he decides the best means of getting the biggest value for the dirham.

He is carefully watching international money markets with the hope that predictions that the dirham could rebound are true.

Simmonds said his dream is to save enough cash to buy a home in Toronto or at least save a large portion of the cost to ease years ahead when he returns.

David Wright, 56, is an American engineer who has been frustratingly watching his earning power drop steadily in recent months. He said he will hang on to his money until the dirham comes back in value.

Wright as well is trying to save money to buy a new home outside of Chicago when he returns to America but said the devalued dirham is making it difficult.

"We’re going to have to spend more time than we planned on living and working in Dubai to make up for the lost value," Wright said.

"My wife really wants to go home but we need to stay a little longer than we expected."

Diminished Income

Harold Orona, 30, a Filipino food technologist, doesn’t like the devalued dirham either.

"The dollar’s decline has cut my income [in Philippine peso terms] by about 20 per cent in the last 24 months. I had started paying for a two-storey house in Manila in 2005 and expected to finish paying for the mortgage in six months. Now, it looks like it would take more than that. " he said.

Janytte Siega, 28, a Filipina events organiser, said the dirham dilemma has put her between a rock and a hard place.

"I came here four years ago, when the dirham’s value against the peso was about 1:15. Due to the dirham’s peg to the greenback, the exchange rate now is about 12 pesos for one dirham.

"The peso appreciation also means I am saving less and shell out more for the same expenses back home. But here too I can’t save because of the rising cost of living. It’s a big squeeze," she said.

Money Trail

Indian Rupee vs. Dirham

Dec. 5, 2003 - Dh1 = INR12.44282
Dec. 5, 2004 - Dh1 = INR12.02506
Dec. 5, 2005 - Dh1 = INR12.58809
Dec. 5, 2006 - Dh1 = INR12.15018
Dec. 5, 2007 - Dh1 = INR10.74094

Peso vs. Dirham

Dec. 5, 2003 - Dh1 = Php15.07841
Dec. 5, 2004 - Dh1 = Php15.33433
Dec. 5, 2005 - Dh1 = Php14.75343
Dec. 5, 2006 - Dh1 = Php13.59078
Dec. 5, 2007 – Dh1 = Php11.51132

UK Pound vs. Dirham
Dec. 5, 2003 - £1 = Dh6.32562
Dec. 5, 2004 - £1 = Dh7.14360
Dec. 5, 2005 - £1 = Dh6.36781
Dec. 5, 2006 - £1 = Dh7.26910
Dec. 5, 2007 - £1 = Dh7.57604

Euro vs. Dirham

Dec. 5, 2003 - €1 = Dh4.43576
Dec. 5, 2004 - €1 = Dh4.94771
Dec. 5, 2005 - €1 = Dh4.30632
Dec. 5, 2006 - €1 = Dh4.89504
Dec. 5, 2007 - €1 = Dh5.39751