UK pound set to gain further against UAE dirham after hitting a one-year high

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The British pound, which hit a one-year high against the UAE dirham and the US dollar this week, is set to gain further as the European economy performs better and fear of recession ebbs.

Investors and traders were also waiting for the central bank – Bank of England's – decision on interest rates, with many expecting an increase in order to contain inflation, supporting Sterling against foreign currencies.

The UK currency gained to 4.65 against the Emirati dirham on Monday, which was hit in the first week of May 2022 last time, ahead of the interest rate decision by the British central bank.

The UAE currency is pegged to the dollar, due to which the dirham follows the greenback’s movement.

“Pound is one of the best-performing currencies this year. In January 2023, the pound/dollar was trading at 1.1965 (4.3945 against the dirham) as against 1.2653 (4.6475 versus the UAE dirham) in May. There is a six per cent appreciation in British Sterling in five months, said Rajiv Raipancholia, CEO and managing director of Orient Exchange.

“The British economy is doing better than expected, and there is an indication that rate hikes would be maintained by the central bank, which can further boost the pound as foreign investors would be attracted for better returns.

At this trend, we can look at pound/dollar 1.30 (4.775 against dirham) this year. This continuous appreciation is also due to investors being more confident in the UK banking sector,” added Raipancholia.