pound wise for investors
dubai — The British pound will trade in three to five per cent band in the coming months until the picture for Britain’s exit from the European Union becomes clearer.
The narrow range and currently lower rate against the dirham will benefit the GCC travellers, investors and British expats in the UAE.
The pound was at 4.91 against the dirham on Monday. The sterling took a beating in June 2016 when it fell to nearly 5.5 against the dirham after the Brexit vote. Once the dust settled and Brexit concerns eased, the pound has been trading more or less steady. Market analysts expect it to trade in a narrow band.
They expect the pound to strengthen in 2019 when the deadline for Brexit will approach. Therefore, now is the best time to invest in the UK before the pound strengthens and investing in Britain becomes costlier.
The UAE investors already have exposure to different UK sectors including retail, real estate and renewable energy, among others.
When the pound loses, British expats take advantage of that by sending money back home or investing in equity or property Sudhesh Giriyan, COO, Xpress Money
We have seen the pound gradually finding stronger ground since October 2017 and it should stabilise in the first half of 2018 Rajiv Raipancholia, CEO, Orient Exchange
Dubai-based developer Damac is expanding in the UK with a 50-storey Aykon London One project. Following the recent appointment of a senior executive, the company aims to strengthen its presence in the country to explore further opportunities.
The UAE will also invest Dh7.22 billion in the UK’s renewable energy projects, Baroness Rona Fairhead, Minister of State for Trade and Export Promotion at the Department for International Trade (DIT), said recently.
According to a recent report from real estate advisory Savills, Middle East and Far Eastern investors nearly doubled their capital investment in the UK’s regional markets in 2016 to around £1.9 billion (Dh8.92 billion).
Sudhesh Giriyan, COO, Xpress Money, doesn’t expect any major fluctuation in the UK currency in early 2018. He says the pound may trade in the band of three to five per cent against the dirham.
“The pound will trade in the band between 4.75 and just over five against the dirham. I think just around five per cent on either side. I’m neither seeing 4.4 or 5.25 levels witnessed earlier. At best, it may go up to five,” he said.
“When currency appreciates,” according to Giriyan, “everyone takes advantage. As and when the pound loses, British expats take advantage of that — by sending money back home or investing in equity or property. They take advantage and remit more funds from here as they get more pounds,” added Giriyan.
Currently, there are more than 200,000 British citizens living in the UAE and over 6,000 companies from the UK are operating in the country.
The bilateral trade and investment is also growing between the UAE and the UK. Baroness Rona Fairhead said the UAE invested Dh7.22 billion on renewable energy in the UK.
Pound may fall up to 5.10
Rajiv Raipancholia, CEO, Orient Exchange, expects the pound to trade in the range of 4.80 to 5.10 against the UAE currency in 2018. He doesn’t see the pound falling to the postBrexit referendum lows in 2018 in the near future but expects it to steadily strengthen.
“With the ongoing negotiations on details of the exit plan, which is now formally agreed as on March 31, 2019, with the transition period completion by December 31, 2020, we have seen the pound gradually finding stronger ground already since October 2017 and should stabilise in the first half of 2018. Again, the stabilisation depends on how the negotiations progress during the coming months,” said Raipancholia.
He recommends customers to remit at the earliest as the GBP is gradually expected to strengthen but all depends on Brexit negotiations.
“Remittances in GBP are expected to increase with many traders having discounted the Brexit fallout. With the expectation of a stronger GBP in future, traders may try and remit in the short-term for any mid- or longterm commitments.”
According to the UAE Central Bank’s third quarter 2017 figures, remittances from the UAE to the UK accounted for 3.7 per cent of the total in the third quarter of 2017.
Brexit talks to dictate pound
Promoth Manghat, CEO, UAE Exchange, also doesn’t expect much rise in the pound against the dirham in the first half of 2018. “With GBP currently trading at 4.907 against the dirham, the highest we see the pound going is a little above 5.”
Manghat believes Brexit is a major influencing factor in the pound’s stability. If both the UK and the EU arrive at an agreement on the terms and conditions in the second phase of Brexit talks in 2018, the currency will recover in H2 of 2018.
“The kind of deal the UK manages to sign before leaving the EU will be a major factor in dictating the value of the pound. The interest rate hikes by the Bank of England in the first half of 2018 would also be another major driver in asserting the upward value of the pound,” Manghat added.
—waheedabbas@khaleejtimes.com