Why the UAE dirham is pegged to the US dollar at 3.6725

The UAE dirham is pegged to the US dollar at a fixed rate of USD 1 = AED 3.6725, the rate the Central Bank of the UAE (CBUAE) publishes. Currency stability is one of the Central Bank’s legal objectives: it commits to trade dirhams for dollars at fixed rates around the peg and aligns its Base Rate with the US Federal Reserve’s rate, so dirham interest rates follow dollar rates.

Key takeaways

• The dirham is fixed at USD 1 = AED 3.6725, the rate the Central Bank of the UAE (CBUAE) publishes; the Ministry of Finance dates the peg to November 1980.
• Keeping the national currency stable is one of the CBUAE's objectives under Federal Decree-Law No. 6 of 2025, and it commits to buy dirhams for US dollars at 3.673 and sell them at 3.672.
• To support the peg, the CBUAE aligns its Base Rate with the US Federal Reserve's Interest on Reserve Balances, so dirham interest rates move with dollar rates.
• Against other currencies the dirham moves with the dollar; its nominal effective exchange rate rose 0.3% in the year to June 2026.
• Banks and exchange houses set their own buying and selling rates and fees, which can differ from the official peg.

On this page 8 sections

What the peg is

The peg is a fixed exchange rate: one US dollar is worth AED 3.6725 at the official rate, and that rate does not move with the market.

Official AED/USD rate

USD 1 = AED 3.6725

The UAE dirham is pegged to the US dollar at USD 1 = AED 3.6725; the CBUAE's published USD rate was 3.6725 on its exchange rates page last updated 20 October 2026.

A floating currency’s value against the dollar rises and falls each day with supply and demand. A pegged currency is held at a set value against an anchor currency instead. For the dirham that anchor is the dollar, so at the official rate the dirham is worth the same number of US cents every day: AED 1 = USD 0.2723, rounded (1 ÷ 3.6725 = 0.272294).

The choice of system is a policy decision taken under the Central Bank law, not a market outcome.

Who sets the exchange rate regime

Regime set by the CBUAE with Cabinet approval

Under Article 31 of Federal Decree-Law No. 6 of 2025, the CBUAE determines the dirham's exchange rate regime after approval by the Cabinet, and takes the necessary measures to manage and control the official exchange rate of the dirham, as per guidelines set by its Board of Directors, to ensure the functioning of money and capital markets in the UAE.

Article 31 names neither the dollar nor a rate. The rate is the one the CBUAE publishes in its exchange rate table, where the US dollar row reads 3.6725.

How long the dirham has been pegged

The Ministry of Finance dates the peg at 3.6725 to November 1980.

Start of the peg, according to the Ministry of Finance

Since November 1980 (according to the Ministry of Finance)

The Ministry of Finance Federal General Budget Annual Report 2025 states that the UAE dirham has been pegged to the US dollar at a fixed rate of 3.6725 AED = 1 USD since November 1980, while maintaining stability through policies by the Central Bank of the UAE.

The UAE Government portal’s fact sheet gives a later date: it says the dirham has been pegged to the dollar at 3.6725 since February 2002. Neither source explains the difference, and the Central Bank pages checked for this guide, including the exchange rate articles of the Central Bank law, give no start date.

How the Central Bank keeps the peg

The CBUAE holds the peg by dealing in dirhams and dollars at fixed rates, backed by its foreign reserves, and by keeping its main interest rate in line with the US Federal Reserve’s. The law makes a stable currency one of its objectives.

The Central Bank's objectives

Currency stability is a statutory objective

Under Article 5 of Federal Decree-Law No. 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business, the CBUAE's objectives are to maintain stability of the national currency within the framework of the monetary system, to contribute to the promotion and protection of the stability of the financial system, and to ensure prudent management of the CBUAE's foreign reserves.

In the foreign exchange market, the CBUAE says it intervenes to keep the dirham at parity with the dollar, dealing with eligible market counterparties at two fixed rates. The midpoint of the two is the official 3.6725.

The Central Bank's dealing rates

Buys AED at 3.673, sells AED at 3.672 per USD

The CBUAE states that, as per its monetary policy objective, it maintains a fixed exchange rate of the UAE dirham against the US dollar and intervenes in the foreign exchange market to do so: it commits to buy dirhams against US dollars from the market at a rate of 3.673 and to sell dirhams against US dollars at a rate of 3.672 with eligible market counterparties, and it holds a stock of liquid foreign currency reserves with which to intervene.

When money flows into the dirham, the CBUAE sells dirhams for dollars at 3.672, so the dirham does not rise. When money flows out, it buys dirhams back at 3.673, paying with dollars from its foreign reserves. The law backs this up: the CBUAE takes the measures needed to manage and control the official rate, it has the function of keeping enough foreign reserves to cover the monetary base, and prudent management of those reserves is one of its objectives.

The CBUAE’s main policy rate is the Base Rate, the rate on its Overnight Deposit Facility, where banks deposit surplus cash overnight. The CBUAE aligns it with the Fed’s Interest on Reserve Balances (IORB), the rate the Fed pays banks on the reserves they hold with it. The Base Rate also acts as a floor for overnight money market rates in the UAE, and the CBUAE runs operations in the money market to keep overnight interbank rates in line with it.

The CBUAE explains why the interest rate matters for the peg: a fixed exchange rate stays stable only if UAE interest rates stay close to US rates. Rates well above US rates would draw speculative money in, and rates well below could push money out, which the CBUAE would have to meet from its foreign reserves. It aligns the Base Rate with IORB, though it says it may adjust that alignment on occasion, depending on market conditions.

UAE interest rates explains how the Base Rate is set and the market benchmarks that follow it, DONIA and EIBOR. Other topics on the UAE economy are listed under UAE economy guides.

What the peg means for rates, prices and trade

Because the dirham is tied to the dollar, UAE interest rates follow US rates, and the dirham cost of anything priced in another currency changes as the dollar changes.

Interest rates

Because the Base Rate is aligned with IORB, Fed decisions carry over to dirham rates. The latest move shows the link.

Latest Base Rate decision

3.90% (from 17 September 2026)

On 16 September 2026 the CBUAE raised its Base Rate, the rate on the Overnight Deposit Facility, by 25 basis points from 3.65% to 3.90%, effective 17 September 2026, after the US Federal Reserve raised its Interest Rate on Reserve Balances (IORB) by 25 basis points; short-term borrowing from the CBUAE stays at 50 basis points above the Base Rate.

Market rates follow. The CBUAE’s September 2026 review reported that overnight interest rates continued to follow the Base Rate closely in the second quarter of 2026, and it describes 3-month EIBOR as a key benchmark for floating-rate loans and derivatives. A dirham loan priced on EIBOR can therefore move with US rate decisions, even though the borrower never deals in dollars.

Prices and inflation

The peg fixes the dirham cost of a price set in dollars, but not of a price set in any other currency. Their cost in dirhams rises when the dollar weakens against the seller’s currency and falls when it strengthens.

The dirham's effective exchange rate

NEER +0.3%; REER -0.6% (June 2026, year on year)

The UAE's nominal effective exchange rate, which compares the dirham with a basket of trading partners' currencies, rose 0.3% year on year in June 2026, broadly mirroring the strengthening of the US dollar, while the real effective exchange rate, which adjusts for inflation differences, fell 0.6%, partly reflecting the UAE's lower inflation than its main trading partners.

For an importer the arithmetic is direct (the 10% moves are illustrations). If the dollar rises 10% against the euro, a euro invoice costs 1 ÷ 1.10 = 0.909 of its former dirham amount, about 9.1% less. A 10% fall in the dollar raises it to 1 ÷ 0.90 = 1.111 of the former amount, about 11.1% more. How import costs and other pressures show up in consumer prices is covered in UAE inflation, and customs and import formalities in importing goods into the UAE.

The dirham against other currencies

At official rates, the dirham moves against every other currency exactly as the dollar does, because the dirhams needed for one unit of another currency are 3.6725 times the dollars needed for it.

What it means for investors and businesses

For anyone who earns, saves or reports in US dollars, the peg removes most of the currency risk between the dirham and the dollar while it holds; exposure to every other currency remains.

A business with dollar revenue and dirham costs, or dollar debts and dirham income, can plan at a known rate, give or take its bank’s margin. A dollar-based investor holding dirham deposits, UAE shares or Treasury bonds and sukuk still carries price and interest rate risk, but little exchange rate risk against the dollar. An investor whose home currency is the euro, the pound or the rupee carries the movement of that currency against the dollar, in both directions.

The peg also simplifies one step in invoicing. A supply priced in another currency still needs dirham amounts on the tax invoice.

Exchange rate for foreign currency invoices

Central Bank exchange rate at the date of supply

If a supply is made in a currency other than the UAE dirham, the amount stated on the Tax Invoice is converted into dirhams at the exchange rate approved by the Central Bank of the UAE on the date of supply.

For a dollar invoice the CBUAE rate is simply the peg. For other currencies it is the rate on the CBUAE’s exchange rates page, which says its rates against the dirham are published only for calculating VAT obligations to the Federal Tax Authority and are mid rates, the midpoint between buying and selling prices. The other particulars an invoice must show are listed under tax invoice requirements.

Converting US dollars to dirhams

Multiply a dollar amount by 3.6725 to get dirhams at the official rate, and divide a dirham amount by 3.6725 to get dollars.

Worked example

Converting at the official rate

The amounts are illustrations. The rate is the CBUAE’s published US dollar rate.

1. USD 100 × 3.6725 = AED 367.25.
2. USD 500 × 3.6725 = AED 1,836.25.
3. USD 1,000 × 3.6725 = AED 3,672.50.
4. The other way: AED 1,000 ÷ 3.6725 = 272.294 dollars, which rounds to USD 272.29.

USD 100 = AED 367.25 at the official rate.

The official rate is not always the rate a customer gets. Banks and exchange houses set their own buying and selling rates and may charge a fee, so changing dollars into dirhams can return less than the peg amount, and buying dollars can cost more. The gap depends on the provider; the USD to AED converter shows what a quoted rate costs against the peg.

Rupees, Egyptian pounds and other currencies whose value moves against the dollar are not pegged to the dirham, so their rates against it change from day to day. The CBUAE exchange rates page lists its mid rates against the dirham for the dollar and dozens of other currencies; a bank or exchange house quotes its own rate for an actual transfer.