The UAE dirham is expected to retain its strength for the rest of 2023 and
the country is set to enter 2024 in lock step with the US Dollar due to the peg,
experts said at the Forex Expo Dubai 2023.
“Economic growth seems to support keeping the interest rates in step with that
of the US, as according to Fitch Ratings forecasts overall GDP growth to slow to
2.1 per cent in 2023 and 3.6 per cent in 2024 after close to 8 per cent in 2022,
with non-oil sectors driving growth,” Amro Zakaria, senior market analyst – Mena
at Forex.com, told Khaleej Times in an interview.
What is the outlook for regional currencies, especially the UAE dirham, for the
rest of 2023?
Swiss Re forecasts the UAE economy to expand by 3 per cent in 2023, with non-oil
sectors driving growth. The IMF’s Representative Exchange Rates for Selected
Currencies for September 2023 lists the UAE Dirham at 3.6725. Mesirow’s 2023
Currency Outlook notes that the USD remains overvalued against most major
currencies, but as inflationary pressures ease, the Fed will most likely reduce.
In summary, the outlook for the UAE Dirham and other regional currencies for the
rest of 2023 is mixed, with some forecasts predicting growth and others
predicting a slowdown. The USD remains overvalued against most major currencies,
but the Fed is expected to reduce as inflationary pressures ease.
With oil nearing $100 and most central banks focused on ‘higher for longer’,
will this likely lead to the dollar’s decline in the rest of the year?
The UAE’s economy and stock markets generally do well in correlation with higher
oil prices. Better performing capital markets further attract capital
investments from overseas where growth can be lower and therefore expectations
of higher returns create a higher demand for the UAE Dirham
Additionally the Dirham is slowly but surely is becoming an international
currency of settlement. Both India and Russia have announced recently that they
would settle bi-lateral trades in Dirhams. That will also create demand and
therefore strengthen the dirham VS other currencies
How do you see the ‘de-dollarisation’ trend picking up?
The decline in the US dollar’s share of foreign exchange reserves has
accelerated after the West froze Russia’s $330 billion in reserves last year for
its Ukraine invasion, prompting other nations to decrease their reliance on the
However, While the trend of de-dollarisation is likely to persist, the US dollar
is expected to maintain its large footprint for the foreseeable future as there
is no alternative that is as big, liquid, and entrenched as the US dollar, the
US bond’s market, and the US banking system.
While the trend of de-dollarisation is likely to persist, the US dollar is
expected to maintain its large footprint for the foreseeable future.