The US and eurozone debt crises have ushered a new era of the improbable in currency and financial markets. This may be a good time to re-assess the UAE's policy of 'pegging' the dirham in a constant relationship of Dh3.67 per US dollar.
Historically, the UAE and most Gulf economies have anchored their domestic currencies to the US dollar. But new uncertainties surrounding the dollar lead many to ask if the UAE should either a) repeg the dirham to a basket of world currencies or b) float the dirham and pursue other monetary objectives.
Let's consider the alternatives.
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