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Yuan’s devaluation brings down UAE’s cost of import from China


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While the weakening of China’s currency (yuan) against the US dollar has rattled investors around the world, the UAE economy stands to benefit from yuan’s devaluation as it has brought down the cost of importing goods coming from China in real effective exchange rate (REER) terms. Real effective exchange rate (REER) denotes the value of the currency of a country relative to the other major currencies in a basket or index (that includes all the major currencies such as US dollar, Japanese yen, euro, etc.) adjusted for inflation. It’s different from the nominal exchange rate which measures the present value of a currency against another. Even though GCC currencies are pegged to


the US dollar, they are most definitely impacted by yuan devaluation, especially SAR & AED, as they are over- valued in trade weighted REER terms. “AED is approximately 25%+


over-valued with respect to major trade partner currencies while SAR is approximately 16-17% over-valued with respect to major trade partner currencies. With yuan devaluation, GCC currencies (SAR & AED especially) will be even appreciate more, which will result in reduction of imported inflation, due to lower import costs from China,” Alp Eke, Senior Economist-Market Insights & Strategy Department, NBAD, told Wealth Monitor.


World’s richest 62 own half of global wealth


The gap between rich and poor is reaching new extremes. Last year, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity, a report by Oxfam has revealed. This figure is down from 388 individuals as recently as 2010, the report said. The wealth of the richest 62 people has risen by 44% in the five years since


February 2016 | www.wealth-monitor.com


2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion. Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%. Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%.


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Wealth Monitor January Poll


Do you expect the UAE and the GCC stock markets to perform better this year?


Yes


No Can’t say


8% To vote, log onto www.wealth-monitor.com 33% 7 58%


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