Why is the dollar rate fixed in the UAE?

The simple answer: stability and convenience. 

The UAE Dirham (AED) is pegged to the US dollar (USD) at a fixed rate of 3.672 AED to 1 USD for buying and 3.673 AED to 1 USD for selling, as indicated by the Central Bank of UAE. This means that regardless of fluctuations in the global currency markets, the value of the UAE Dirham remains constant in relation to the US dollar.

Now, why is this fixed rate so appealing?  

Stability is the name of the game in any economy. By pegging the Dirham to the dollar, the UAE ensures a stable exchange rate, which fosters investor confidence and facilitates international trade. 

Think about it this way: Imagine you're a business owner in Dubai importing goods from the United States. With a fixed exchange rate, you can accurately predict your costs and plan your budget without worrying about sudden currency fluctuations eating into your profits.  

Moreover, the fixed exchange rate simplifies everyday transactions for residents and tourists alike. Whether you're shopping in Dubai's glitzy malls or enjoying a leisurely brunch in Abu Dhabi, you don't have to constantly crunch numbers to figure out how much your Dirhams are worth in dollars. It's a hassle-free experience that keeps the wheels of commerce turning smoothly. 

While the fixed exchange rate offers stability, it also means that the UAE relinquishes some control over its monetary policy. Since the value of the Dirham is tied to the dollar, changes in US monetary policy can indirectly impact the UAE's economy.