The Rise of Currency Multipolarity: UAE and India to Trade in Rupee, Bypassing Third-Party Currencies
The United Arab Emirates (UAE) and India are set to announce their agreement to trade in Indian Rupee, bypassing unnecessary third-party currencies and transactions. This move is a significant step towards promoting economic efficiency and reducing transaction costs, and it underlines the growing trend towards currency multipolarity.
In recent years, there has been a shift towards trading in local currencies rather than the US Dollar, which has traditionally been the dominant global currency. This trend is driven by economic reasons and the desire to reduce dependence on a single currency. The UAE and India’s decision to trade in Indian Rupee reflects this trend.
The use of local currencies in trade has several advantages. First, it reduces transaction costs as there is no need to convert currencies, which can be expensive. Second, it reduces currency risk as both parties are not exposed to fluctuations in the value of a third-party currency. Finally, it promotes economic efficiency as it simplifies transactions, making them faster and more streamlined.
The UAE and India have strong trade relations, and this move is expected to further strengthen these ties. India is the UAE’s second-largest trading partner, with trade between the two countries reaching $60 billion in 2020. The use of Indian Rupee in trade will make transactions between the two countries smoother and more efficient, which should increase trade volumes.
This move is part of a growing trend towards currency multipolarity, where multiple currencies are used for trade, rather than a single dominant currency. This trend reflects the changing global economic landscape and the growing economic power of emerging markets.
The use of local currencies in trade is not limited to the UAE and India. Many countries, particularly in Asia, have started trading in local currencies. For example, China has promoted the use of its currency, the yuan, in trade with other countries. Similarly, Russia has been pushing for the use of the ruble in international trade.
In conclusion, the UAE and India’s decision to trade in Indian Rupee is a significant step towards promoting economic efficiency and reducing transaction costs. It reflects the growing trend towards currency multipolarity, which is becoming a reality. As more countries follow suit and trade in local currencies, it is likely to have a significant impact on the global economic landscape, reducing dependence on a single currency and promoting economic efficiency.
