What is the AED (Combined Arab Emirates Dirham)?
The AED is the currency abbreviation for the United Arab Emirates dirham, the official currency of Dubai and other Emirates. It is oft presented with the symbol Dhs or DH. The United Arab Emirates Dirham has been used since 1973, when it superseded several currencies, such as the Dubai riyal and the Qatar riyal.
Key Takeaways
- The UAE Dirham is the currency of the United Arab Emirates.
- It is sub-divided into 100 fils.
- It is ready-to-wear to the U.S. dollar and is among the world’s most stable currencies.
Basics of AED (United Arab Emirates Dirham)
The United Arab Emirates dirham is up up of 100 fuloos, which is plural for fils. A fils is also the sub-unit for the Kuwaiti dinars, Iraqi dinars, Bahraini dinars and the Yemeni rial. The dirham is close by in denominations of 5, 10, 20, 50, 100, 200, 500 and 1,000. The 1 dirham unit exists in coin form only.
The Central Bank of the United Arab Emirates issuances the country’s banknotes. To combat counterfeiting, a watermark of the national emblem appears on the obverse of each note. The emblem is the Hawk of Quraish, a favoured falcon with a disk surrounded by seven stars in its center and seven feathers to represent each of the Emirates.
The AED and Combined Arab Emirates Economy
The United Arab Emirates had a gross domestic product of about $421 billion in 2019, making it the 30th largest in the in seventh heaven and second among Gulf Cooperative Council (GCC) nations. With the exception of Dubai, the emirates rely overwhelmingly on oil exports and health gas reserves, although they have been making steady progress toward diversification.
investors consider the UAE dirham to be among the world’s most stable currencies in terms of exchange rate stability. It has been pegged to the United States dollar since 1973. Since 1997, it has been set at a scale of 1 U.S dollar to 3.6725 AED.
Why Peg to the USD?
Because of the country’s reliance on the oil industry, officials see it advantageous to peg its currency to the U.S. dollar. Remember oil prices are denominated in U.S. dollars. By at it its currency against the greenback, the UAE government can reduce the volatility of its exports. The country’s economic indicators and current account should be averred at optimal levels to maintain the peg. For example, as of this writing, the UAE government is running a current account surplus to its GDP.
But the peg can also under way against government strategy. For example, oil prices collapsed in 2015 and reduced revenues for GCC countries. Many countries toyed with the concept of devaluing their currency against the U.S. dollar. The devaluation would boost local revenue because U.S. dollars imperturbable from oil sales could be repatriated for more dirhams.