A year ago, the fact that the UAE dirham was pegged to the then weakening US dollar made the country a honeypot for European tourists. But for their compatriots working there and converting their dirham-based salaries back into euros or sterling, the exchange rate was a killer.
Now the strengthening greenback has made it more attractive for Brits, at least - and, to a lesser extent, those from the eurozone - to work there. Americans are largely unaffected because they effectively earn dollars whatever the state of the UAE currency.
For British expatriates, a salary of 500,000 dirhams would recently have equated to almost £100,000. Twelve months ago, it may have been worth only £80,000. This makes a difference to those paying off a mortgage or paying into a bank account at home, although the cost of living in the UAE itself depends more on local inflation levels.
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These have fallen from about 12% a year ago to an official level of 5%, although the EFG-Hermes bank predicted in March that the UAE could experience price deflation this year, driven by a 50% collapse in Dubai rents as formerly highly paid professionals leave the emirate. This could lead to pressure to reduce salaries, or at least gnaw away at benefits.
Occasionally, employers will hedge local salaries against big fluctuations in exchange rates, but the fact that there are more candidates available for jobs is likely to make them less willing to do that.
This shows that, while it is important to do your sums when considering working abroad, it is best not to base too many decisions on short-term fluctuations in exchange, interest and inflation rates, especially when you expect to be there for the long run.
Source: Flight International