Challenges in the International Business Market Through Fixed Currency Systems: A Study Based on Business Scenario in UAE

Abstract

The contemporary global business scenario is significantly dynamic that incorporates modern financial and business potentials and possibilities making business avenues simultaneously flexible and fair. Until recent past sea was considered as worst option to reach nations for doing business. However, after realization of the concept that business can easily be spread beyond national boundaries, men started conquering lands for conducting business and to earn higher income and profit. Consequently, the business faced the challenge of meeting larger demands of goods and services across the nations, as a results business started dealings in number of possibilities such as exchange of facilities, barter system, gold/silver related commodities. Meanwhile, the disadvantage of doing business across borders in such a way was widely propagated. As a result nations and business were forced to use a unique and commonly accepted commodity as a medium of exchange, which should overcome the problems of barter system and gold rates system. This led to the birth of modern currency and further advancements in the form of financial instruments including paper currencies and bullion exchanges. Majority of the modern day business are guided by the profit, and doing business in international currency relatively increases the rate of profit. At the beginning nations started exploring number of possibilities of trade on the basis of fixed and floating exchange rate for capital gains. This modern type of multiple payment settlement system in business across borders has increased the attractiveness of international business; customers search for quality products at competitive prices. Consequently, companies and even economies have been considering international business as best alternative for earing higher profits while at the same time doing business with developed and stable economies. Trade among countries and regions needs unified currency, which has been made easy through introduction of fixed and floating exchange rate systems. Countries entering into international trade agreements either fix-up a common value for the currency in which regular trading happens with another nation or tie up with the currency of a develop economy. The fixed exchange rate system has enabled countries to make prior financial arrangements required for modern day businesses. Present study has been carried out to properly examine the currency arrangements in UAE against US Dollars and other GCC countries’ currencies. Hence the study has evaluated the expected benefits of fixed exchange rate system in case of UAE. In addition to that, prime factors that significantly affect the process of pegging UAE currency against major currencies such as USD, Euro, and Pound Sterling have also been examined.