Will the UAE abandon its currency peg?

Will the UAE drop it’s currency peg to the Dollar? It’s a question that begs our discussion every now and again.

Most people understand that the dirham is pegged to the dollar. Let’s not get technical here, (which I may add is very easy to do in this context) about how or why this is done. Let’s discuss the impact on our pockets should the currency de-peg.

If you are paid dirhams and have dirham assets a de-peg will almost certainly mean bad news. If the central bank decided to de-peg the dirham then your money would almost certainly fall in value. The question is how much?

The Kazakhstani tenge devalued against the dollar by 23% last year when their central bank decided to abandon the peg and free float the currency. Granted Kazakhstan is not the UAE, however the point is this; when planning your future you should take all risks into consideration.

So, the answer to this improbable but possible event is really very simple. Don’t hold more dirhams than you have to.

Do you really need more than three months outgoings in your bank account? Opening an offshore multi-currency account is easy and free in many cases. Move the rest offshore and save USD.

If you have a mortgage on a UAE property you may find that your equity suffers as the value of your property will likely fall, as buyers retreat to stability. If you have lent USD and converted to AED to buy here, you may want to have a good conversation with your banker now.