The UAE Dirham (AED) displayed a firm and steady presence in Pakistan’s open currency market on Tuesday as it was quoted at nearly 77.05 Pakistani Rupees (PKR).
This level is likely a sigh of relief for millions of expatriates, students, and businessmen following the vital financial corridor. This is the point to which the currency has steadily climbed up in the past week after its appreciation from 76 levels up to near 77 marks. The current rate represents a point of equilibrium offering predictability over a notoriously uncertain financial world.
To comprehend the underpinnings of the rate, one has to understand the underlying valuation processes of both the economies.The Dhiram is stable as it is pegged to the US Dollar at the rate of 3.6725 Dhiram per US Dollar.
Therefore, AED to PKR is largely a reflection of USD to PKR rate in the inter-bank market. However, the open market rate, where physical cash exchanges hands, normally comes at a small premium compared to inter-bank rate.
The underlying reason behind the strength and steadiness of the Dirham can be found in the prudent and future-oriented economic policies of the United Arab Emirates. Contrary to a majority of regional countries which are prone to petrodollar volatility, the UAE has successfully diversified its economy towards trading, tourism, technology and global financial services. It ensures the Dhiram stays adequately backed and resistant to speculative attacks with the help of massive foreign exchange reserves and strict fiscal discipline monitored by its central bank. This macroeconomic stability of the UAE directly and indirectly contributes to the investor confidence that the Dhiram inspires.
The implication of a steady yet strong Dirham on both consumers and the country itself is manifold. The strong rate comes as a boon for the more than 1.5 million Pakistani expats living in the Emirates. When they send money to their relatives in Pakistan, the good conversion rate translates into more buying power for the families. On the flip side, it leads to more expensive imports from Dubai ranging from electronics and text books to other household appliances. This cost of imports can then potentially translate into higher domestic inflation in Pakistan with its associated impact on common products in local markets.
The disparity between the currencies of the two nations can also be understood by knowing more about both the currencies themselves.
Introduced in 1973 to unify the seven Emirates of the UAE, the Dirham (plural of Dirham is Dhirahim) is a symbol of the prosperity in the gulf. A unit is comprised of 100 fils and is a fiat currency supervised by a central bank.
AED to PKR – Latest Updates
The Rupee, on the other hand is a unit of the Pakistani currency and comes in 100 paisa. A managed float currency managed by the State Bank of Pakistan, its value has continuously been challenged by its developing nature of the economy. With massive foreign exchange reserves, the Dirham is expected to hold steady against the Pakistani currency until at least June 2019.