UAE Dirham to Dollar Peg
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UAE Dirham to Dollar Peg
Read in todays Gulf News (last weeks approved news) that the plonkers are going to stick with the US Dollar peg.
I am not a trained economist but I can argue for several reasons why this is no good for me as an expat in a nation where we make up the majority, for the UAE and this region as a whole.
1. the UAE is importing inflation.
2. the low value of the local currency is overheating an already overheated property market.
3. the GCC and the UAE are selling their oil and gas at a discounted rate and squandering their futures. I suspect the hand of the US in maintaining an artificially low price of energy so that they can continue to wage war in Iraq. The oil embargo of 1973 had a significant impact on the Americans during the closing stages of the Vietnam war.
4. the low value of the local currency is going to bite into the labour market to the point where above average wage rises will have to take place (albeit slowly). This in turn will fuel the inflation cycle/spiral upwards.
5. artificial pegs have been used effectively during the Asian financial crisis by Malaysia but in the long run they tend to hide economic inefficiencies of the nation.
thoughts anyone? or am I preaching to the converted?
I am not a trained economist but I can argue for several reasons why this is no good for me as an expat in a nation where we make up the majority, for the UAE and this region as a whole.
1. the UAE is importing inflation.
2. the low value of the local currency is overheating an already overheated property market.
3. the GCC and the UAE are selling their oil and gas at a discounted rate and squandering their futures. I suspect the hand of the US in maintaining an artificially low price of energy so that they can continue to wage war in Iraq. The oil embargo of 1973 had a significant impact on the Americans during the closing stages of the Vietnam war.
4. the low value of the local currency is going to bite into the labour market to the point where above average wage rises will have to take place (albeit slowly). This in turn will fuel the inflation cycle/spiral upwards.
5. artificial pegs have been used effectively during the Asian financial crisis by Malaysia but in the long run they tend to hide economic inefficiencies of the nation.
thoughts anyone? or am I preaching to the converted?
Last edited by Funk; 8th Jun 2007 at 12:42. Reason: syntax
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Funk,
Agree with most of your points except maybe # 3. The U.S. imports almost as much oil from Nigeria as they do from the entire Middle East combined. "Cheaper" oil is hardly what's keeping the U.S. in Iraq.
I'm hoping they repeg it. We have all lost an awful lot in the last few years.
Jinglie'd
Agree with most of your points except maybe # 3. The U.S. imports almost as much oil from Nigeria as they do from the entire Middle East combined. "Cheaper" oil is hardly what's keeping the U.S. in Iraq.
I'm hoping they repeg it. We have all lost an awful lot in the last few years.
Jinglie'd
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scanscanscan
, apart from a float of 15K AED no money kepted in the region for exactly the reasons you have outlined.
jinglied
yer I had heard that they are also heavily dependent on Angolan and Venezualan crude. It is probably more that the trade in the GCC oil in US Dollars maintains an artificial demand for the US Dollar. Call me paranoid the aircraft carriers turned up around here just after Iran moved to sales in Euros (ala Sadam).
, apart from a float of 15K AED no money kepted in the region for exactly the reasons you have outlined.jinglied
yer I had heard that they are also heavily dependent on Angolan and Venezualan crude. It is probably more that the trade in the GCC oil in US Dollars maintains an artificial demand for the US Dollar. Call me paranoid the aircraft carriers turned up around here just after Iran moved to sales in Euros (ala Sadam).
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When a currency is 'pegged' the country loses most control of their monetary policy. The can't adjust money supply etc to control inflation.
Pegging to the US dollar is effective when things are stable and, more importantly, for a country that does not have the 'maturity' to effect good monetary policy.
UAE may adjust the exchange rate by 3% in the future according to the last report I read.
Pegging to the US dollar is effective when things are stable and, more importantly, for a country that does not have the 'maturity' to effect good monetary policy.
UAE may adjust the exchange rate by 3% in the future according to the last report I read.
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Like everyone I do really hope that the UAE does either revalue the currency, or completely unpeg the currency. My only difference to you other guys is, I am keeping my savings here in the UAE, and trying the best I can to use this bad situation to my advantage. I know as earlier guys have said it is a risk, but there are opportunities to be had here considering the booming economy right now, and given a bit of common sense, I think you can do well by keeping your money in Dirhams right now.
As I said you might all tell me I told you so in a year or two, but so far so good. Each to their own but I just wanted to present a different alternative to the "get the money out of here whatever the cost" line of thinking.
Of course Funky you could just spend all the money here, and have a good time doing it!
As I said you might all tell me I told you so in a year or two, but so far so good. Each to their own but I just wanted to present a different alternative to the "get the money out of here whatever the cost" line of thinking.
Of course Funky you could just spend all the money here, and have a good time doing it!
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Remember gentlemen, there are other currencies and other places that one can park one's savings earned in the ME 
It's a punt, but then most things in life are... but I'd be looking for a currency or two from countries where the interest rates are forecast to rise... because that's where the big punters move and park their cash in amounts that alter currency valuations on a global scale.
Like anyone, they look for the best interest rate. But, when that interest rate is no longer appealing, a very large amount of cash is moved out in a very short amount of time.
For share market punters, watch for a downward trend in your currency... it's almost inevitably followed by a dump in the share market as the foreign private equity is withdrawn from the market... and it can only end in tears for the Mums & Dads investors who never saw it coming...
It's a punt, but then most things in life are... but I'd be looking for a currency or two from countries where the interest rates are forecast to rise... because that's where the big punters move and park their cash in amounts that alter currency valuations on a global scale.
Like anyone, they look for the best interest rate. But, when that interest rate is no longer appealing, a very large amount of cash is moved out in a very short amount of time.
For share market punters, watch for a downward trend in your currency... it's almost inevitably followed by a dump in the share market as the foreign private equity is withdrawn from the market... and it can only end in tears for the Mums & Dads investors who never saw it coming...
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You need to understand Quokka, that due to the Dirham (and all other Gulf Currencies other than Kuwaits) effectively being US Dollars by just another name, if you move the money out of the Gulf, it doesn't matter which currency you move it into you will be screwed. I would argue that right now, if you can you either leave it parked here or if you can get it invested elsewhere still as US dollars. I know I may be wrong but at some time the US dollar will strengthen again (not back to the old days but at least a bit).
As I said I personally feel comfortable trying to cash in on the boom here, and just making sure I invest in companies and areas that are somewhat insulated from any crash that may happen in the future. I just can't bring myself to transfer my savings back to Oz at a rate of almost 3.1 dirhams to the Aussie, when it was 1.96 to the dollar when I arrived. Then again I can almost hear all of you saying it beats 4 to 1 in a couple of years time. We will see.
As I said I personally feel comfortable trying to cash in on the boom here, and just making sure I invest in companies and areas that are somewhat insulated from any crash that may happen in the future. I just can't bring myself to transfer my savings back to Oz at a rate of almost 3.1 dirhams to the Aussie, when it was 1.96 to the dollar when I arrived. Then again I can almost hear all of you saying it beats 4 to 1 in a couple of years time. We will see.
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There is a daily newsletter that comments on the currency movements worldwide. Very informative and helpful in your long term currency issues. Subscribe for free here.
The dollar is fundamentally flawed. The only thing that keeps it afloat right now is that many other currencies have the same issue and many nations have very large U.S. dollar reserves so it behooves them to keep the pace of dollar decline slow. Many nations are diversifying their currency reserves to lower their exposure to the dollar. The UAE is one of them.
Typhoonpilot
The dollar is fundamentally flawed. The only thing that keeps it afloat right now is that many other currencies have the same issue and many nations have very large U.S. dollar reserves so it behooves them to keep the pace of dollar decline slow. Many nations are diversifying their currency reserves to lower their exposure to the dollar. The UAE is one of them.
Typhoonpilot
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I have been wondering for a while if it would be good here to try to have a thread about investments and money issues for the expat pilot. After typhoons post and a link to a sound site (thanks), it would be good to have a thread perhaps that we could all look into, to gain advice and ideas as to how best to invest our dwindling Dirham. The property market has come and gone for the real cash big returns in the UAE, except maybe in RAK or UAQ? Where else would you invest to make a buck, here in the ME as was said earlier, you gotta look after yerself! How do you feel financially invested, down the mall, happy wife, happy life? With the US$ going only south, we must get the money invested elsewhere, or the value of any savings will only reduce over time. 
Whatever happens,.. happens!
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My experience is that conversation on Flight-decks (when conditions permit) often revolve around financial matters.
We all agree that one solution to assuring an enjoyable retirement does not fit all, most of us do agree that we must diversify our investments to prevent the catastrophic hits.
Because of the lack of consensous and the wide disparity in the ages of Ppruners, I think it would be almost pointless to try and set up some kind of Pprune-financial-forum.
I am continuously reviewing my investment choices and I am hoping that changes we may be forced to make to our lifes as a result of climate change etc. will not obliterate my assets in traditional industries. On the other hand I have a significant portion of my hard earned $ invested in Terra-not-so-firma that is less then 10 feet above MSL. I hope I can flip it before it submerges and use the proceeds to purchase a farm in a more elevated region. Perhaps grow tropical fruit in the Alps!
fluf
We all agree that one solution to assuring an enjoyable retirement does not fit all, most of us do agree that we must diversify our investments to prevent the catastrophic hits.
Because of the lack of consensous and the wide disparity in the ages of Ppruners, I think it would be almost pointless to try and set up some kind of Pprune-financial-forum.
I am continuously reviewing my investment choices and I am hoping that changes we may be forced to make to our lifes as a result of climate change etc. will not obliterate my assets in traditional industries. On the other hand I have a significant portion of my hard earned $ invested in Terra-not-so-firma that is less then 10 feet above MSL. I hope I can flip it before it submerges and use the proceeds to purchase a farm in a more elevated region. Perhaps grow tropical fruit in the Alps!
fluf
