Kavan Choksi On How UAE’s Dirham is Benefitted after Being Pegged to The US Dollar
The practice of pegging GCC currencies to the USD is an age-old principle, and it serves many advantages for nations like the United Arab Emirates. Both UAE and Saudi Arabia currencies have been pegged to USD since the 1980s. The practice has indeed been continuing for a very long time, but the market is changing and becoming complex. Financial experts feel it is high time for nations to reconcile pegging with the dollar after assessing its volatility in the market for progress.
Kavan Choksi – a business expert, speaks
Kavan Choksi is a business expert and has invaluable knowledge about investments and cryptocurrencies. According to him, when you are going in for any sort of investment, say, for example, cryptocurrencies, you should consult a good financial advisor in the field to understand what they are, how to buy them, where to trade them, and so on and so forth! Every investment has its share of risks, so knowledge of risk management is essential as well.
Cryptocurrencies are highly volatile in the market, so he advises you always to take caution when buying, to sell, or trading with them. Read credible resources, keep track of the recent news, and consult a skilled professional in the area before you deal with them.
When it comes to the practice of pegging the UAE Dirham with the USD, one should be clear on what pegging means. Currency pegging is the standard practice of binding currency rates of two nations, the second country being the stronger one. The Central Banks control the market operations of these currencies to stabilize this currency by binding it against the other nation that is stronger in the global economy.
Benefits of pegging the USD with the UAE Dirham
According to him, there are a few benefits of pegging the UAE dirham with the US dollar, and the first one is this step has helped the exchange rate of the United Arab Emirates. The demand for oil from the other nations of the UAE has risen, and this, in turn, has led to an increase in wealth. The Capital gained through the sales of oil is reinvested into the companies of the USA to get better returns.
Pegging the USD with the UAE Dirham helps keep inflation under control in the USA
Business and finance expert Kavan Choksi sees the above as a primary advantage as pegging the local currency to the USD is increasing the wealth of the region that depends upon the oil industry. It helps in the reduction of the volatility of exports as well. However, according to him, in order to retain the peg, the economic indicators of the nation along with the accounts should be kept at optimal levels.
Maintains economic stability
IMF observed that the Dirham’s stability depends upon the US dollar, and this is how the exchange rates are successfully maintained. The above currency peg has also boosted a stable rate of exchange in the region’s economy, offering several advantages to banks and attracting more foreign investments in the nation. Last but not least, the pegging of the USD with the Dirham will enhance the confidence of the investor in the region and boost the other sectors of the UAE too!
