Monday, December 03, 2007

UAE money changers throw out the dollar

There's the official rate and there's the market rate. The official rate has become untenable in the eyes of the market.

Gulf News says one of them is arbitrary
Arbitrary dirham rates offered by UAE money changers, in some cases as low as Dh3.05 per dollar or almost 17 per cent lower than the official rate, are sowing more confusion in the market where speculation on the dirham's revaluation is already rampant.

The UAE currency has been pegged at 3.6725 to the dollar since 1997 and until Sunday there was no change in the official peg.
Money changers, hotels and stores in shopping malls were accepting dollars at rates ranging from Dh3.05 to Dh3.50 per dollar yesterday.
"It is strange," said Ahmad Jan from Saudi Arabia as he walked between a bank branch and a money exchange at Deira City Centre and noted that the bank offered 60 fils more per dollar.

"What you see here is the official rate," a manager at the bank said.

Moroccan visitor Nasser Bin Omar said he accepted the lower dollar rate from the money dealer because he did not want to wait in the long queue at the bank.
Ah, yes, opportunity cost. The time cost of waiting. If the same thing is being sold at two different rates, where do the queues occur?

See, also, yesterday's story in the Gulf News,
UAE cautions markets against betting on dirham revaluation
The UAE warned markets against betting on a dirham revaluation as investors piled pressure on the region's dollar pegs, expecting Gulf states to change currency policy at a summit this week.
In remarks carried by the Al Khaleej newspaper, [Central Bank Governor Sultan Bin Nasser] Al Suwaidi moved to quell investor expectations that a change was imminent.
Bahrain's central bank threatened to take action against anyone betting on dinar appreciation and accused foreign banks of spreading revaluation rumours, the Middle East Economic Digest reported after an interview with Governor Rasheed Al Maraj.

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Anonymous Currency Rates said...

Nice article : UAE cautions markets against betting on dirham revaluation

3:01 PM  

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