Expats from Australia, Canada and South Africa living in the UAE have been hit by the fall in the US dollar, which makes the dirhams they earn worth less in their home currencies.
Soaring currencies hit expats in pocket
Expats from Australia, Canada and South Africa have seen the value of their home currencies soar, with the value of the US dollar taking a beating on exchanges.
The trend is hitting thousands of expats in the pocket, since their dollar-pegged earnings are worth less when sent back to their home countries.
The Canadian dollar rose to equal value with the greenback this week, while the Australian dollar has also approached parity, with one Aussie dollar buying a fraction less than its US counterpart yesterday.
The shrinking value of the US dollar could have major consequences for the UAE, which fixes its currency at 3.67 dirhams to the dollar.
Neil Mellor, a senior currency strategist at BNY Mellon, said: "I think we're still looking at dollar weakness for the foreseeable future." Many currencies "are being forced into uncharted territory", he said.
Though the Canadian dollar has been level with the greenback several times during the past few years, the last time the Australian dollar held parity with its US counterpart was in 1982, when Men at Work's classic single "Land Down Under" was riding high in the charts and the Australian dollar did not float freely.
Commodity currencies such as the rand, the Australian dollar and the Canadian dollar offer a high yield and exposure to rising prices of metals, which Mr Mellor said was largely driven by growth in emerging markets.
South Africa, which is one of the world's largest producers of gold, has also seen an appreciation of its currency along with the price of bullion, currently at historic highs of US$1,375 per troy ounce.
While a weaker dirham means more expensive imports for the UAE, Philippe Dauba-Pantanacce, a senior economist at Standard Chartered Bank, said that the risk of inflation in the UAE was low because of a slump in property prices.
However, the waning strength of the dirham has made it more difficult for UAE companies to retain staff, eroding the value of pay packets, according to Christo Daniels, the manager of the recruitment company IQ Selection.
He said a number of staff had opted for Asian countries, including Australia, when renewing contracts. "It doesn't bode particularly well for the UAE that those markets are buoyant."
However, though currency fluctuations might affect earnings in the short term, some said that higher earning potential did not outweigh other positive features of the UAE.
Lindsey McDonald,an analyst at the consultancy Frost and Sullivan, said that she had not considered moving back home, since she was still drawn by the cosmopolitan nature of Dubai, along with the chance to travel and the high level of personal security. "I can walk around Dubai Marina at 2 or 3 in the morning. In South Africa that's just simply not the case."
Mr Mellor said that the shine had come off the dollar as a haven because of expectations that the US Federal Reserve would create new money to finance stimulus measures and inflate away a large amount of the US public debt, currently valued at $13.6 trillion (Dh49.95tn).
Some currencies have experienced sharp rises in value against the dirham, even though their underlying economies are struggling. The dirham has fallen against the euro by 17 per since mid-year, though exchange rates are now closer to January levels.