Quote:
Originally Posted by mpat
They will start with 2 or 3 % ,but it will continue periodically and within a year it will be around 20 %.All are expecting this 2 or 3 % in this month.Even though it was clarified last week that they will not change the peg , but it looks like they will have to do it.
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You may very well be right but sometimes the obvious is not what ends up happening. I can still remember a conversation in 1998 with a senior European banker who was convinced that the chinese were going to revalue their currency and he was not alone. Fast forward to 2007 and guess what the Chinese are still basically aligned with the USD.
The Chinese motivation was to make their goods super competitive and so stimulate their economy. The US thought this was great because cheap goods allowed them to keep inflation at bay and so keep their interest rates low.
In the case of Dubai, I could speculate that their main priority is to keep sucking foreign investors money in to fund their development and this over rides the issue of inflation, therefore it is in their best interest to keep the peg and thus their real estate more "affordable". Also oil is priced in USD so if the AED appreciates, then they will get less AED per barrel.