Declining dollar shakes boomtown, UAE

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Think the declining dollar is a bane for American consumers but a boon for everyone else? Think again. Even in Dubai, where glitz and glamorous construction continues unabated and soveriegn wealth funds prowl international markets, the consequences are showing up where you wouldn’t expect:

Taxi drivers have become more fractious as fines for bad driving or declining to pick up passengers have eaten into pay packets that have also been eroded by the weakness of the United Arab Emirates dollar-pegged dirham against currencies in their home countries.

Dubai is now in talks with Pakistan after attempting to deport some 50 drivers who went on strike last month. The drivers were fed up with increased regulations and the rising cost of living, which the declining dirham doesn’t help.

But the systemic problems caused by the dollar’s slide aren’t going to be so easy to whisk away. The emirate’s record-setting growth is fueling inflation, and the weakened dirham is making imports more expensive. Despite speculation late last year that the UAE would drop the dollar, nothing seems to have changed since February, when the central banks of the Gulf Arab countries restated their commitment to the greenback. We’ll see how long they can hold out.