What is the AED (United Arab Emirates Dirham)
The AED (United Arab Emirates Dirham) is the currency abbreviation for the United Arab Emirates dirham, the official currency of Dubai and other Emirates. It is often presented with the symbol Dhs or DH. The United Arab Emirates Dirham has been used since 1973, when it replaced several currencies, such as the Dubai riyal and the Qatar riyal.
BREAKING DOWN AED (United Arab Emirates Dirham)
The United Arab Emirates dirham is made 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 available 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 issues 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 golden falcon with a disk surrounded by seven stars in its center and seven feathers to represent each of the Emirates.
The AED and United Arab Emirates Economy
The United Arab Emirates had a gross domestic product of about $350 billion in 2016, making it the 30th largest in the world and second among Gulf Coast Coalition nations. With the exception of Dubai, the emirates rely overwhelmingly on the exportation of oil and natural gas reserves, although they have been making steady progress toward diversification.
The UAE experienced an annual inflation rate of 3.7% in 2015, a substantial increase over the 2014 rate of 2.3%. Despite concerns over inflation, investors consider the UAE dirham as among the world’s most stable currencies in terms of exchange rate stability. It has been pegged to the United States dollar since 1973, and since 1997 it has been set at a rate of 1 U.S dollar to 3.6725 AED. The World Competitiveness Centre of the International Institute for Management Development (IMD), based in Switzerland, ranks the UAE dirham as the 24th most stable currency in the world, above the currencies of many major European countries.
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 so by pegging their currency it can reduce the volatility in the value of its exports.
During the oil crisis of 2015, many Middle Eastern countries toyed with the idea of devaluing its currency against the U.S. dollar. By doing this it would simply increase local revenue as the money earned from selling oil in U.S. dollar would be repatriated for more dirhams.