The sharp fall in the dirham's purchasing power has eroded residents' savings
While the "live now, pay later" syndrome of US policy has undermined the global confidence in the dollar, it is unfair to penalise UAE residents for someone else's financial indiscipline, wrote a UAE daily.
"The perennial decline of the dollar is effectively penalising UAE residents for the past fiscal profligacy of the US. There seems to be no respite in sight as the UAE Central Bank remains adamant on sticking to the dirham's peg to the dollar," said the Dubai-based 'Gulf News' in its editorial today.
The English language newspaper went on saying that the sharp fall of the dollar has taken the dirham along with it. The impact of exchange rate loss, like that of indirect taxes, is regressive in nature as it hits the lower income groups the hardest. UAE residents, already reeling under the rising cost of living, are now facing the prospect of sharp value erosion of their earnings.
"Last year the country's inflation hit a 19-year high of 9.3 per cent. A large number of expatriates working in the country are losing a major share of their earnings to inflation and currency depreciation," the daily noted.
"The dollar's fall from the grace hit a new milestone last week, with the euro rising above $1.41 for the first time. The immediate trigger for the dollar's recent sharp decline was a half per cent interest rate cut by the US Federal Reserve to prop up the domestic liquidity. The key underlying factor behind the rate cut, the weakness in US domestic growth, is here to stay for some time and further rate cuts by the Fed in the months ahead are a reality that currency markets are already anticipating," added the paper.
"The dirham has lost heavily in purchasing power. A weaker dollar is also causing a decline in the value of dollar denominated assets and investments, which underlines the urgent need for revaluation or even depegging," the paper concluded. Source
"The perennial decline of the dollar is effectively penalising UAE residents for the past fiscal profligacy of the US. There seems to be no respite in sight as the UAE Central Bank remains adamant on sticking to the dirham's peg to the dollar," said the Dubai-based 'Gulf News' in its editorial today.
The English language newspaper went on saying that the sharp fall of the dollar has taken the dirham along with it. The impact of exchange rate loss, like that of indirect taxes, is regressive in nature as it hits the lower income groups the hardest. UAE residents, already reeling under the rising cost of living, are now facing the prospect of sharp value erosion of their earnings.
"Last year the country's inflation hit a 19-year high of 9.3 per cent. A large number of expatriates working in the country are losing a major share of their earnings to inflation and currency depreciation," the daily noted.
"The dollar's fall from the grace hit a new milestone last week, with the euro rising above $1.41 for the first time. The immediate trigger for the dollar's recent sharp decline was a half per cent interest rate cut by the US Federal Reserve to prop up the domestic liquidity. The key underlying factor behind the rate cut, the weakness in US domestic growth, is here to stay for some time and further rate cuts by the Fed in the months ahead are a reality that currency markets are already anticipating," added the paper.
"The dirham has lost heavily in purchasing power. A weaker dollar is also causing a decline in the value of dollar denominated assets and investments, which underlines the urgent need for revaluation or even depegging," the paper concluded. Source
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