UAE Dirham (AED) - Currency of UAE

Some facts that you ought to know about the dubai currency:

1. The short name for Dubai currency is AED.
2. The symbol for Dubai currency is DH, DHS.
3. The most frequently used coins come in 25 fils, 50 fils and 1 Dirham.
4. The most frequently used banknotes are 5 Dirhams, 10 Dirhams, 20 Dirhams, 50 Dirhams, 100 Dirhams, 200 Dirhams, 500 Dirhams, 1000 Dirhams.
5. The Central Bank Of The United Arab Emirates is the chief bank of the UAE.

History of UAE Dirham

Until UAE Dirham was induced in UAE, Bahraini Dinar, Qatari, and Dubai Riyal had monetary supremacy in the UAE since 1966. On 19th May 1973, UAE Dirham was introduced in the country by the Central Board. By 1980, UAE also established its Central Bank under Law no. 10 of 1980. Prior to the Central Bank, the flow of money was regulated and managed by the Central Board established under Law No. 02 of 1973. The Central Bank issues both currency notes and coins. The denominations of UAE Dirham currency notes, CBUAE, are 5, 10, 20, 50, 100, 200, 500, and 1000. On the other side, the common denominations of coins are 5, 10, and 25 fils.

Dirham has occupied a valuable position in the currency and commercial markets. The word Dirham has been derived from the Greek word 'Drachmae', which means 'handful'. All the currency notes issued by the Central Bank have some sort of symbol on the obverse side of the notes. Some depict a golden falcon with a disc in the middle which is covered by seven stars and feathers in a circular design. The seven icons in the currency notes represent the seven Emirates of the UAE. The beautiful symbols of nationalism, especially on classic Dirham insignia, are definitely worth noticing carefully.

By 1978, Dirham was also pegged to the US Dollar by the IMF (International Monetary Fund), considering the volatility of the oil market of the UAE. Currently, 1 Dirham is equal to 0.27 US Dollars, which makes 1 US Dollars= 3.67 UAE Dirhams. Coins also play an interesting and essential role in the currency system of the UAE. The lower denominations of the UAE Dirham coins are bronze. The higher denominations, on the other hand, are made from cupro-nickel. It is not really common to spot the transactions of 1, 5, and 10 Dirham coins. Most of these transactions are rounded up to the multiple of 25 fils. The use of 1 fils is mostly not seen anymore.

Factors affecting UAE Dirham currency

The United Arab Emirates Dirham has proved its strength over the past decades and has come up as one of the most stable and valuable currencies in the world. There are several factors that keep the exchange rate (the rate at which the Dirham or any other currency is exchanged with other currencies in the world) of the Dirham at a stable position, and any change in these may lead to a change in the currency's exchange rate. These include:

1. Economic activities and related changes:

Countries like UAE are in continuous trading relations with other countries in the world. The basis of the trade is the exchange of the currency as per the existing exchange rate. So, any change in the trade or economic activity inside UAE or the trading countries, rise in inflation or unemployment, the GDP value, etc., can affect the exchange rate of AED.

2. Rate of interest:

The Central Bank is responsible for setting the rate of interest of AED. If the interest rate is high, there will be a higher attraction of foreign investments. However, if the interest rate is low, foreign investment can gradually decline. This, in turn, can positively or negatively affect the exchange rate of AED.

3. The rule in the country:

Any investment or trading relation can only grow when the respective countries have political stability. In the lack of governance and uncertainty of the political scenario, the traders and investors may not want to invest due to the strong sense of trading insecurities. Hence, it is essential for UAE to maintain the stability of the government so the trade keeps blooming and the exchange rate of AED remains high.

4. A country based on oil trading:

One of the strongest reasons why the UAE is leading several sectors of the world is its oil industry. UAE is the hub of oil, and countries across the globe have joined hands with the UAE for the purpose of oil trading. So, increasing oil trading means benefits to AED and the country as a whole. On the other hand, a decline in oil prices can badly affect the value of AED as well as the economy of the country.

5. Foreign exchange reserves:

A country can only purchase or trade with another country when it has sufficient foreign exchange reserves. It also directly affects the value of the country's currency, like the AED. So, it is vital for the Central Bank to maintain a good flow of foreign exchange reserves.

6. Unforeseen and unfortunate events:

Any sort of crisis, conflict among people and nations, disaster, riot, war, etc., can heavily impact the overall performance of a country. Not only does it affects the present scenario, but it has a long-lasting effect. Such unfortunate incidents can also bring a change in the value of AED in the international economy.