1 dirham: exchange rate against the dollar and the ruble. Monetary unit of the United Arab Emirates

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the past, the United Arab Emirates was a desert territory of little use for the development of agriculture, where poor tribes lived. Oil wells have turned them into an economically prosperous state with state-of-the-art infrastructure.

The currency of this Arab country is called dirham. This word came from ancient times and was used to designate a monetary unit back in the days of the first caliphs. It is worth noting that this name is also used in other Arabic-speaking countries, for example, there is a Moroccan dirham. The UAE currency is stable thanks to a strong economy, which is based on huge oil reserves. The exchange rate of the national currency has not changed much since the country's independence in 1971.

History of the founding of the state

In the second half of the first millennium AD, small principalities located on the southern coast of the Persian Gulf became part of the Arab Caliphate and converted to Islam. In subsequent centuries, as the central power in the empire weakened, these territories received de facto autonomy. In the era of great geographical discoveries of the principalityThe Persian Gulf to a certain extent came under the influence of such major European colonial powers as Portugal and Great Britain. In the 19th century, the United Kingdom established full control over the Arab states in this territory. The principalities of the Persian Gulf were under British protectorate until 1968. Independence was proclaimed after the withdrawal of British troops. In 1971, the Arab monarchs entered into an agreement to create a federal state. The main principle of coexistence was the right of each emirate to dispose of oil reserves on its territory.

Etymology

The name of the modern currency of the UAE comes from the ancient Greek word "drachma", meaning "handful". The Arabic dirham is a corruption of the original term. In the ancient world, a silver coin was called a drachma, as well as a unit of measurement used when weighing precious metals, equal to 4.36 grams.

Medieval use

In the Arab Caliphate, the dirham was the exact analogue of the ancient Greek means of payment. It was a silver coin weighing about 4 grams. In accordance with Islamic traditions, there were no images on the monetary unit. On the coins of the Arab Caliphate there were inscriptions containing quotations from the Koran and the names of the rulers. The dirham was distributed throughout the vast territory of the Muslim empire. The weight and shape of the coins, as well as the quality of the metal, varied in different regions. In the Middle Ages, the dirhamminted in all major cities located on the territory of the Great Silk Road. As a universal means of payment in international trade, Arab silver coins penetrated European countries in large quantities. Archaeological expeditions have repeatedly discovered ancient dirhams even in Russia.

Issuance in UAE

In the period of the British protectorate, the Indian rupee was the main monetary unit of the Emirates of the Persian Gulf. After the Second World War, at the end of the era of colonialism, a currency reform was carried out. The Central Bank of already independent India issued in 1959 a separate type of monetary unit - the rupee of the Persian Gulf. The strong drop in the exchange rate that followed a few years later caused the Arab principalities to abandon their first own currency and officially introduce the Bahraini dinar and the reals of Qatar and Saudi Arabia into circulation. After the formation of a federal state, a national monetary unit was created - the UAE dirham. Other currencies ceased circulation on the territory of the principalities. The proclamation of an independent state and the issuance of its own currency coincided with the oil boom, which provided significant support to the economy of the Emirates of the Persian Gulf.

Dirham to dollar. Course

The Central Bank of the UAE adheres to the concept of artificially fixing the exchange rate of the national means of payment. Such a currency regime is typical for relatively small Arab countries with hugehydrocarbon reserves. The exchange rate of the dirham against the US dollar was set by the directive of the Central Bank at the time of the official circulation of the national currency. The UAE currency, unlike many others, does not have market quotes and is not subject to fluctuations. In 1973, the dirham to the US dollar was fixed at 3.94. Over the following decades, this ratio did not undergo any major shifts. The current exchange rate of the dirham against the dollar is 3.67.

For the sake of objectivity, it should be noted that the firmness and stability of the UAE currency is conditional. The dirham fully reflects the dynamics of the purchasing power of the US dollar. Strictly speaking, it is a derivative of the American currency. How to determine how much 1 dirham is worth in Russian rubles? The answer to this question is determined by the exchange rate of the Russian currency against the US dollar. The value of 1 dirham in rubles exactly repeats the market fluctuations of the monetary unit of the Russian Federation. In the period before the serious weakening of the Russian currency, which occurred at the end of 2014, the value of this cross-rate was approximately 8.70. Now for 1 dirham they give 15-16 rubles.

Currency policy

Responsibility for decision-making in the financial sector lies with the Central Bank of the UAE. This government body insists on maintaining a tight peg of the dirham to the US dollar. The fixed exchange rate eliminates the practice of inflation targeting in the country. The Central Bank of the UAE is actually in the position of a hostage of the monetary policy of the US Federal Reserveservices. Recently, the currency regime in the United Arab Emirates has often become a subject of controversy. Floating advocates point out that current policies create opportunities for speculative attacks.

There is an intermediate option - linking the national currency to a basket of several of the world's most liquid currencies. However, to date, the position of the financial authorities of the UAE remains unchanged.

Banknotes

The most popular banknotes are 5, 10, 20, 50 and 100 dirhams. Banknotes of 500 and 1000 are less common in circulation. The government of the United Arab Emirates does not follow the widespread tradition in the world of placing portraits of prominent citizens and national heroes on banknotes. On UAE banknotes, you can see only images of the sights of the country. The front side contains texts in Arabic, the back - in English. The early series of paper money included the 1 dirham note. Now, for practical reasons, it has been withdrawn from circulation and replaced by a coin.

The smallest bill has a denomination of 5 dirhams. The front side depicts the famous market of the city of Sharjah, on the back - a view of the large port in Khor Fakkan on the coast of the Indian Ocean. The banknote of 10 dirhams is decorated with a drawing of a traditional Arab blade. The front side of the 20 dirham banknote depicts a yacht club located in the capital of the UAE. On the back is an Arabian sailing ship made of teak wood. The front side of the 50 dirham banknote depicts a desertantelope. On the back - a fortress in the city of Al Ain. The banknote of 100 dirhams is decorated with views of the country's capital. On it you can admire the images of the international trade center and the ancient fort in Dubai.

Coins

1 dirham is divided into 100 fils. From Arabic, this word is translated as "money". Almost all coins in the UAE are denominated in fils. One part is made of bronze, the other part is made of an alloy of copper and nickel. The denomination of the largest coin is 1 dirham. It depicts a round Arabic vessel. The denomination of smaller metallic money is 1, 5, 10, 25 and 50 fils. The latest coin draws attention with its unusual heptagonal shape.