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Currencies |
| UNITED ARAB EMIRATES DIRHAM |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of UAE dirham | Weekly
trend of UAE Dirham |
| Introduction |
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Dirham is the name of the official currencies of the countries
United Arab Emirates and Morocco. It also serves as the subunit of
the currencies Qatar riyal (equal to 1/100 of riyal), Libyan dinar
(equal 1/1000 of dinar), and Jordanian dinar (equal to 1/10 of
dinar). As the currency of United Arab Emirates, dirham is called
Emirati dirham that is denoted with the symbol "د.إ"
in the Arabic language that translates A.D and is also denoted as
"DH or Dhs" in the unofficial abbreviated form. The
Emirati dirham is divided into 100 parts of the subunit known as
"fils".
According to the ISO 4217 standard, the
currency code for the United Arab Emirates dirham is AED and the
numeric code for it is 784. The currency is in operation since
1973 when it was introduced for the first time replacing the Qatar
and Dubai riyal.
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Overview
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Dirham had been a very important currency in the Islamic world and
in the Middle East as it has been a prime medium of exchange since
ages. The word dirham was taken up from the word "dirhem"
that
came from "drachm", the name of an ancient Greek coin. UAE was
once considered a poor desert area as there is no scope for
agriculture there but now it has transformed into a modern country
having a real high standard of living that is ranked 35 out of 232
countries courtesy its oil wealth. The oil exports contribute over
one third of the Gross Domestic Product of the country and that is
why the prices of the oil access control over the growth and
performance of the country.
The UAE dirham keeps constant with the value
of the United States dollar, the exchange rate between the two
being 1 US dollar = 3.67 UAE dirham, not fluctuating much over a
long span of time. Off lately, this linkage with the US dollar is
not proving much advantageous, as the recent depreciation of
dollar has negatively affected purchasing power parity of UAE
dirham against other currencies. Regarding the restrictions on the
export and import of currency in the country, a declaration is
needed for the amounts exceeding AED 40000 and equivalent amounts.
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Structure
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The Emirati dirham has "fils" as its
subunit dividing 1 unit of the currency into 100
equal subunits. For small denominations of the
currency i.e. below 1 dirham, coins are issued
and for the denominations above 1 dirham, bank
notes of the currency are issued. Central Bank
of United Arab Emirates possesses the authority
of issuing the currency in the country as the
central bank. The dirham coins are available in
6 face values of 1, 5, 10, 25, 50 fils and 1
dirham. The value and number of the coins is
engraved in Eastern Arabic numerals and the text
in Arabic language. 1, 5 and 10 fils coins are
rare in the current scenario and that is why
most of the prices are rounded up in the
multiples of 25. With the 1 Philippine peso coin
having the same size but only around 7% in value
as compared to 1 Emirati dirham coin, there had
been problems of fraud in the country. Also, the
central bank had been minting various
commemorative coins since 1976.
Regarding banknotes, they
are issued in 8 denominations namely 5, 10, 20,
50, 100, 200, 500 and 1000 dirhams. The text on
the front side of the dirham note is printed in Arabic
and the values in the Eastern Arabic numerals.
On the backside of the notes, the numerals are
printed in Hindu Arabic numerals and the text in
English. 200 dirham notes have not been printed
since 1989 but are still in circulation.
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| History |
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UAE was formed in the year 1972 when the six states
namely Dubai, Sharjah, Fujairah, Ajman, Abu Dhabi and
Umm-al-Qaiwain merged to form this single country.
Prior to this, the states didn’t have their own
currency and the use of other foreign currencies
prevailed especially Indian rupee. Rupee was used as a
principal currency for exchange till 1959 when the
Reserve Bank of India issued the Persian gulf rupee to
be used by the gulf countries instead of the Indian
rupee. The Bahraini dinar was introduced in 1966 that
replaced the gulf rupee @ 1 Bahraini dinar = 10
Persian Gulf rupee in the Trucial states except 1
state i.e. Abu Dhabi, which adopted the use of the
Qatar-Dubai riyal.
With the formation of the United
Arab Emirates, the UAE dirham was made the official
currency of the country. It was circulated in place of
Bahraini dinar @ 10 UAE dirham = 1 Bahraini dinar and
in place of Qatar-Dubai riyal at par. Initially the
currency was issued by the United Arab Emirates
currency board but since the 1982 the authority of
issuing the currency is in the hands of the United
Arab central bank. Dirham is mostly pegged with the US
dollar and the exchange rate between them i.e. 1 US
dollar = 3.67 UAE dirham has not varied much since the
1980s.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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