Outline the prospects for the UAE exchange rate over the coming year. Explain how this can...

Outline the prospects for the UAE exchange rate over the coming year. Explain how this can impact MNCs operating in the UAE

Expert Solution

The Woerldwide Coronal virus epidemic and the massive fall in crude demand and historically low crude price is casting a shadow over the business prospects in coming year.

Recovery from the impending recession is a huge challenge and given that the demand and price for Crude will be on the lower side, the exchange rate of AED will be trading though a negative path over the next year as it appears.

The AED may be softer against USD that means the USD rate per AED should be higher than the current range of 0.272.

This softening of AED will have huge impact on the MNCs operating out of UAE.

The export of commodities from UAE will fetch more AED due to the undervaluation, but most of the MNC is crude sector will lose money on an overall basis due to falling prices of crude.

The falling exchange rate of AED will mean that all the imports will be costlier and the input cost will be much higher. This will be double whammy for oil business as revenues will fall and input cost will go up.

The Margin outlook for MNCs will be negative on an overall basis. Due to the overall lower business sentiment , the Foreign investment in MNCs will be less.

So overall not a bright situation for MNCs in UAE , like all over in the world due to unprecedented change in business scenario.

jeff jeffy answered 1 year ago

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