King dollar commands surge in remittances
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[November 10, 2022] By
Harish Sridharan
(Reuters) - Seafarer Jhan Kharl Rodica
recently returned home to Manila after an eight-month voyage and bought
a townhouse outside the city, courtesy in part, he said, of the U.S.
dollar's best year in a generation.
A marine engineer who worked at an oil tanker around Africa and Asia
this year, Rodica is paid in dollars and has been wiring extra cash back
home - part of a worldwide trend that has driven a surge in remittance
volumes as the dollar has climbed.
The cash is well received in countries, such as the Philippines, where
living costs are soaring, providing a lifeline for families and even
some smaller economies that depend on it. The World Bank estimates
remittances to low and middle-income countries will rise 4.2% to $630
billion this year, and the flow is another sign of the far-reaching
consequences of the dollar's gains.
The U.S. dollar index, which measures its performance against a basket
of major currencies, is up 14.5% this year.
It has climbed more than 20% against some smaller currencies that see
sizeable remittance flows, such as the Bangladesh taka or Pakistani
rupee, which is encouraging workers to send extra cash.
"When there is strength in the U.S. dollar, often we see an increase in
new U.S. customers... as well as customers in certain markets seizing
the opportunity to get more local currency home," said Pankaj Sharma,
executive vice president for global remittance business management at
Remitly.
Transfer volumes at Remitly leapt 44% to $7.5 billion in the September
quarter. Larger rival Wise said volumes were up 49% to 24.4 billion
pounds ($28.2 billion) in the July quarter. Wise shares have more than
doubled since July.
MoneyGram International and PayPal Holdings have also posted an uptick
in turnover and transactions in their third quarter.
The jump is all the more noteworthy as remittances, rooted in necessity,
have long been steady and reliable flows, and more sensitive to
employment and growth than currency moves.
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A picture illustration shows U.S.
100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko
Nakao/File Photo
The dollar plays an outsized role in remittance transfers because a
lot of wage earners are paid in the U.S. currency, or, for
expatriates in places such as Hong Kong or the Persian Gulf,
currencies pegged to it.
To be sure, currency moves do not change the prime motive for such
payments and plenty of those sending money back home are insensitive
to them.
"You never know what will happen with these rates," said Albert
Javier, a Filipino-American living in the United States who has been
sending remittances for nearly two years.
"I totally understand people waiting it out and gunning for the
prime exchange rate, but to me, it is more important that my family
gets the money they need, when they need it."
Still, Western Union and Wise both noted currencies' relative
strength do tend to influence volumes, and for Rodica, the Filipino
sailor, who is 26, it has provided a cushion for his partner and
twin daughters in uncertain times.
"When I started my career in seafaring couple of years ago, a dollar
was around 47 pesos, but right now it is over 58 pesos," said Kharl,
an increase of more than 23%.
"Some of us get to match or not get too affected by inflation
because we earn in U.S. dollars."
(Reporting by Harish Sridharan in Bengaluru; Additional reporting by
Neil Jerome Morales in Manila; Editing by Tomasz Janowski)
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