India, UAE sign currency swap agreement, to directly trade in dirham, rupee

The Dollar Business Bureau

India and the United Arab Emirates (UAE) have signed a currency swap agreement that will enable businesses from both the nations to directly trade in each other’s currency, bypassing the US Dollar or any other international currency.

The signing of agreement means that business communities from both sides can save huge money as trade between the two countries reached to new highs.

“India and the UAE have reached an agreement that will enable businesses in both countries to bypass the dollar and other foreign currencies and trade directly in dirhams or rupees,” said Navdeep Suri, India’s Ambassador to the UAE.

“[This] means that there is a saving for the business community. It makes trade between the two countries more competitive,” he added.

Suri further said that this agreement is in addition to the pacts and memoranda of understanding (MoUs) that were inked during the just-concluded visit of Prime Minister Narendra Modi to the UAE.

The UAE dirham has a fixed peg against the US dollar. However, the currency swap agreement could have a positive impact on trade between the UAE and India as the US Administration under President Donald Trump further cements an expansionary fiscal policy and the Federal Reserve considers increase in rate.

Indian rupee is not pegged against the US dollar and is determined by a basket of international currencies. Thus, the impact of US policies on the Indian currency would be larger and positive to trade with UAE.

The current level of bilateral trade between India and the UAE is amounted to around $53 billion, from a mere $182 million in 1982.