50 Dirhams (Central Bank of the UAE) – United Arab Emirates

In 2003, the currency situation in the United Arab Emirates was defined by its long-standing and unwavering peg to the United States Dollar. This fixed exchange rate regime, established in the late 1970s and formally set at AED 3.6725 per USD 1 in 1997, provided crucial stability for the UAE's oil-dependent, open economy. It anchored monetary policy, eliminated currency risk for foreign investors, and facilitated the massive import and expatriate labor flows underpinning the nation's rapid development. The peg was considered a cornerstone of economic policy, fostering confidence in Dubai and Abu Dhabi's burgeoning trade, tourism, and financial services sectors.

The context of 2003, however, was marked by a significant external pressure: the dollar's broad depreciation. As the USD weakened against major currencies like the Euro and the Pound Sterling, the UAE Dirham effectively weakened in tandem. This imported inflation became a growing concern, as it increased the cost of imports from non-dollar zones, particularly for construction materials and consumer goods critical to the UAE's economic boom. While the hydrocarbon sector benefited from dollar-denominated oil revenues, the declining purchasing power of the dirham began to affect the cost of living for the large expatriate population and the project economics of the non-oil sector.

Despite these inflationary pressures, 2003 saw no serious official consideration of abandoning the dollar peg. The UAE monetary authorities, particularly the Central Bank, consistently reaffirmed their commitment to the fixed rate, valuing its stability benefits over the speculative risks of a revaluation or float. The policy priority remained managing inflation through other means, while the dollar peg continued to serve as a key tool for attracting foreign capital and financing the nation's ambitious infrastructure and diversification projects, which were accelerating dramatically in the early 2000s.