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Posted On: 8 November 2016 08:08 am
Updated On: 12 November 2020 02:16 pm

Currency fluctuation by Fed rate hike to benefit expatriates

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Expatriates in Qatar are likely to benefit from US Federal Reserve’s widely expected move to hike interest rates. The hike in interest rates, which is expected to be around 25 basis points or 0.25 percentage points, will make major currencies around to the world to depreciate.

A depreciating currency benefits expatriates because they get additional income due to decline. When a currency appreciates or rise against Qatari riyal, expatriates get less from their currency.
Most of the currencies have remained stable in the last six months. Indian rupee is trading in the range of 18.24 – 18.30 per Qatari riyal since May this year.

Euro has traded in the range of 4.10- 4.04, Philippine peso is in 12.97 to 13.30 range while Pakistani rupee is in 28.74-28.78 range.
Egyptian pound has traded around 2.44 per riyal, Sri Lankan rupee in 40.01-40.55 range and Nepalese rupee has stuck to 29.07-29.33 range against local currency in the last six months.

“US Central Bank did not touch interest rates this week because of the Presidential Election tomorrow. But it is now widely expected that the Fed will hike interest rates in its next meeting in December because data shows that US economy is now on stronger footing,” Zuber Abdul Rahman, Operations Manager, Al Zaman Exchange told the Peninsula.

“The likely hike in the interest rates will strengthen US dollar which in turn will weaken major currencies,” he added.

The US Federal Reserve kept interest rates unchanged on Wednesday in its last policy decision before the US election, but signalled it could go for a hike in December as the economy gathers momentum and inflation picks up.
The US central bank said the economy had gained steam and job gains remained solid. Policymakers also expressed more optimism that inflation was moving toward their 2 percent target.

The next meeting of the Federal Open Market Committee of US Federal Reserve is on December 14. Traders have assigned about a 76 percent probability of a rate hike by year-end, according to futures data compiled by Bloomberg.
"All in all, the (inflation) data fits perfectly with a Fed hike in December, and does nothing to detract from a view that the market has underpriced Fed tightening risks for 2017." said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, in a note. (Source)