Sunday, April 22, 2007

Weak American Dollar Not Good News For Expatriates

The mighty American Dollar is losing in strength. This is not good news to some one like me who lives in Dubai – A country where the UAE Dirham is pegged to the dollar. The last couple of years have seen the greenback getting weak against most currencies. The weakening dollar drastically affects my purchasing power back home in India and this is cause for concern. Things will seem far too expensive back home when the dollar or dirham is converted.

The dollar has lost more than 10% in the past year or so. A UAE Dirham which was close to rupees 13 at on point (1.5 to 2 years ago) is now languishing at rupees 11.30. The dollar has fallen from rupees 45 to a little over 41/- now. That’s a near Rs 4 loss to every dollar. Expatriates in this country are not a happy lot with a weak greenback. To worsen things this coincides with a very strong pound sterling and a strong euro as well. One pound has surged to $2. The pound is at its highest against the dollar in the past 25 years. One Euro now fetches a high $1.35. All this has hit hard on expatriates whose income is in Dollars or dollar linked currencies and who want to spend the money in sterling, euro or Indian rupees. It becomes difficult to send money back home to countries like India, Britain and Germany from a country like the UAE. Those wishing to send their children for education to Britain or Europe will be affected. Those who save in dollars only are protected but if an expat wishes to go back home it hits him. The UAE Dirham was expected to be revalued but it has not happened.

Analysts are not expecting a rebound of the US Dollar any time soon. America's growing military commitments in Iraq and elsewhere is likely to keep the dollar low for the next few months. The greenback at the moment is reflecting the state of America vis-a-vis the rest of the world. Of course the mighty dollar might bounce back again. With a change in government at the white house the dollar could regain its lost glory. After all, the dollar has been the best performing currency over the last two decades.

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