Effects of currency volatility on remittances

  • ERemit
  • 29 July, 2021
  • 2 minutes read

Talking about the term “Currency Volatility”, it is the unpredictable movement of exchange rates in the global foreign exchange market. Being an immigrant in Australia who wishes to send some money to your family back home, it’s quite essential that you consider the currency exchange rates. Why essential? Because it will seriously affect the amount of money you send or receive. Here we are looking into the effects of currency volatility on international money transfer.

So here is the deal! Upon making a remittance, the sender for sure must take into account the value of the domestic currency. If there is an appreciation of the domestic currency, the ratio of remittances will reduce. Why? Because it comes as a form of cost to the remitter. But if the remitter is targeting a particular and stable amount of money, remittances may increase as such.

Again, any depreciation of the currency is profitable for inward remittances. Let’s take India as an example, if there is a depreciation of the Indian rupee, it usually has a positive effect on remittances, as the ratio of remittances and investments increase. Remittances have become the main contributors to the economy of developing countries after foreign direct investments (FDIs).

Apart from the effects of currency volatility on remittances, there are other concerns to the senders such as the high costs of remittances. There are countries that limit remittances to bank wires, which makes international money transfers way more expensive.

In Australia, banks are not the only option to remit funds to your loved ones at home. You can gladly rely on the best online money transfer in Australia to transfer money at the lowest fees. However, the impacts of currency volatility can significantly influence the amount of money the beneficiary will receive in the home country.