United Arab Emirates

UNITED ARAB EMIRATES
Name
Course
Institution
Date of Submission
United Arab Emirates
1) Name and symbol of the country's currency, profile of the currency
The currency symbol for United Arab Emirates is called the dirham, whose currency abbreviation is AED. There are other unofficial abbreviations like DH or Dhs. The United Arab Emirates dirham was introduced on 19 May, 1973, when it replaced the Qatari and Dubai riyal and the Bahraini dinar (abbreviated as BHB) at 1 AED =0.1 BHD. The BHD has been used in Abu Dhabi between 1966 and 1973, while the six other emirs namely: Dubai, Sharjah, Ajman, Umm al-Quwain, Ras, al-Khaimah and Fujairah used the Qatar and dubai riyal in those years. Between 1959 and 1966, all the seven emirs used the currency of Gulf rupee. Qatar and Dubai had adopted the Saudi riyal (SAR), albeit briefly, which was at a rate of Indian rupee exchanging at 1 SAR= 1.065 INR in 1966. Today the exchange rate of the Saudi riyal and the Indian rupee stands at 1 SAR =14.64 INR. The Bahrain dinar was introduced in UAE in 1965, where it replaced the Gulf rupee, at a rate of 1 BHD =10 Gulf rupees. The Gulf rupee at that time was at par with the Indian rupee on until 1966. Today, the exchange rate of the Bahraini dinar and the Indian rupee stands at 1 BHD –145.600 INR (Toledo, 2013).
The Gulf rupee which is also known as the Persian Gulf rupee was introduced in the Persian Gulf countries as well as the Arabian Peninsula and was equivalent to the Indian Rupee until 1966. Today the exchange rate of the United Arab Emirates and the Indian rupee stands at 1 AED =14.7 INR. The United Arab Emirates dinar has been at an exchange rate of 1 USD =3.6 AED since 1997 in November. The United Arab Emirates dirham is divided into 100 fils. The in circulation coins as of current are in dominations of 25, 50 fils and 1 dirham. The banknotes currently in circulation are in denominations of 5, 10, 20, 50, 100, 200, 500, 1000 dirhams (Central Bank of the UAE).
The Dirham has been an important currency among Islamic world because of the fact that it has been a prime medium of exchange for ages. Dirham is derived from the word ‘dirhem’ which comes from "drachm" which is the name of an ancient Greek coin. At one time in the country’s history, the UAE was considered a poor desert country without any scope for agriculture, but that tide has since been turned with the country now ranking 35 out of 232 countries due to its vast oil wealth (Sayani, and Miniaoni, 2013). UAE now has a real high standard of living with its wealth exports contributing over one third of the country’s Gross Domestic Product (GDP). The UAE dirham has been constant against the United States dollar, with an exchange rate of 1 USD = 3.67 UAE, a rate that has not fluctuated majorly in a long span of time. Lately however, this linkage between these two currencies has proved not to be much advantageous due to the recent depreciations of the dollar which correspondingly has had negative effect on the purchasing power of the UAE against other currencies (UAE National Bureau of Standards).
The UAE dirham has ‘fils’ as its subunit dividing 1 unit of its currency into 100 equal subunits. The small denominations of the currency (those below 1 dirham) come in the form of coins, while for the denominations above 1 dirham they come in the form of bank notes. The authority of issuing currency in the country is held by the Central Bank of United Arab Emirates. The dirham coins are available in 6 face values which are 1, 5, 10, 25 and 50 fils and 1 dirham. The value and the number of coins are engraved on the coin in Eastern Arabic numerals and the text in Arabic language. As stated earlier, the bank notes come in 8 denominations which are 5, 10, 20, 50, 100, 200, 500, and 1000 dirhams, and the text appearing in them is on the front side is printed in Arabic and the note’s value is printed in Eastern Arabic numerals (Sayani and Miniaoni, 2013).
2) The Central Bank of the United Arab Emirates?
The Central Bank of the United Arab Emirates is the central bank of United Arab Emirates, and is headquartered at the nation’s capital which is Abu Dhabi. The central bank is the only statutory body that is entirely mandated to produce currency for the United Arab Emirates. On May 19, 1973, the UAE established the United Arab Emirates Currency Board in an effort to replace the Bahraini dinar and the Qatar and Dubai riyal currencies, the main currencies in the UAE at that time having been in circulation in the country since 1966. The function of the Currency Board was limited to just issuing the dirham and ensuring that the currency got the requisite banking of the proper amount of gold and foreign currencies (Barret, 2010). In that regard, it was therefore not authorized by law to advise the country on the various fiscal and monetary policies. Despite this limitation however, the board would later organize banking in the country, and with the help of the International Monetary Fund (IMF), the Currency Board was able to organize detailed banking and monetary statistics for the businesses and banks in the country (Sayani and Miniaoni, 2013).
The board would eventually become the Central Bank of the United Arab Emirates after the enactment of the Union Law No. (10) Of 1980, regarding the Central Bank, the monetary system as well as the organization of banking on December 10, 1980. As per that law, the Central Bank of the United Arab Emirates is authorized to issue currency in the form of banknotes and coins. Additionally, it is mandated with ensuring that the currency remain stable and allowing it to be freely convertible into other currencies, its other roles include generation of policies that help the national economy to achieve balanced growth, to monitor the efficiency of the national banking systems, and to function as the bank of the Emirates Government (Central Bank of the U.A.E).
3) Direct and indirect exchange rates of the dirham and other foreign currencies.
The Exchange rates of different currencies against 1 AED
Currency Name

Currency Symbol

Exchange Rate

Date

Australian Dollar AUD 0.2910 11/11/13 12:02
Japanese Yen JPY 27.012 11/11/13 12:02
Canadian Dollar CAD 0.2853 11/11/13 12:02
Saudi Riyal SAR ...