One subject
Currency pegs and Gulf macro
6 lessons, 18 glossary terms and 17 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
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The curriculum
6 lessons cover this.
In curriculum order, which is the order you would meet them.
- What commodities and metals areModule 01What you are actually trading7 min
- GCC hours against London and New YorkModule 06When the market moves9 min
- The ECB, the Bank of Japan and the People's Bank of ChinaModule 08Macro and the calendar9 min
- The CBUAE and SAMAModule 08Macro and the calendar9 min
- Oil as a regional macro driverModule 08Macro and the calendar9 min
- What a currency peg doesModule 08Macro and the calendar8 min
The glossary
18 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Adjustable pegA fixed exchange rate that the issuing authority reserves the right to reset, holding a currency inside a stated band until policy or reserves make a new central rate necessary.
- Central bank interventionCentral bank intervention is the buying or selling of a currency by the monetary authority itself, undertaken to move or defend its exchange rate rather than to make money.
- Central Bank of the UAEThe Central Bank of the UAE is the monetary authority for the dirham, and because the dirham is pegged to the US dollar its policy rate tracks the dollar's rather than being set against domestic conditions.
- Commodity currencyA commodity currency belongs to an economy whose exports are dominated by raw materials, so its exchange rate has tended to move with the price of what that country sells.
- Currency pegA currency peg fixes one currency's rate against another currency or a basket, held there by a central bank standing ready to buy or sell its own currency at that rate.
- DepreciationA fall in one currency's value against another driven by trading rather than by an official decision, which is exactly what separates it from a devaluation.
- DevaluationAn official reduction of a currency's fixed rate by the authority that sets it, arrived at as a decision and announced, rather than produced by trading.
- Emerging market currencyAn emerging market currency belongs to an economy classified as developing by index providers, and typically trades with thinner depth, wider spreads and greater sensitivity to global funding conditions.
- Exchange rateAn exchange rate states the price of one currency in terms of another: how many units of the second currency one single unit of the first currency costs.
- Fiscal breakeven priceA fiscal breakeven price is the oil price at which an oil exporting government's revenue covers its planned spending, which converts a commodity price into a statement about that state's budget.
- Fixed exchange rateAn exchange rate that a country's authorities hold at a stated level, or inside a stated band, against another currency or a basket, maintained by intervention rather than by the market.
- Floating exchange rateAn exchange rate left to supply and demand in the market rather than held at a level by the authorities, so it moves continuously and has no official value on any given day.
- Gulf Standard TimeGulf Standard Time is the fixed offset ahead of Coordinated Universal Time used in the United Arab Emirates and Oman, and it has never shifted seasonally.
- Hard currencyA currency that is freely convertible, traded in deep markets and widely accepted for settlement outside its own country, which is why counterparties hold it willingly.
- OPECOPEC is the Organization of the Petroleum Exporting Countries, a group of oil producing states that coordinates production quotas among its members in order to influence the oil price.
- Pegged currencyA pegged currency is one whose exchange rate the issuing authority holds at a fixed level, or inside a narrow band, against another currency or a basket of them.
- PetrodollarPetrodollar names US dollar revenue earned from selling crude oil, and by extension the long standing convention under which internationally traded oil is invoiced and settled in dollars.
- Saudi Central BankThe Saudi Central Bank, known by the abbreviation SAMA, is the monetary authority of Saudi Arabia, and it holds the riyal at a fixed rate against the US dollar.
The market guides
17 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- Exotic currency pairsMarketsHow the market uses the term, why depth and financing differ here, and what the pegged Gulf pairs share.
- Gold quoted in currencies other than the dollarMarketsWhy gold is quoted in currencies other than the dollar, and how a move splits into metal and currency.
- How the crude oil market works: Brent and WTIMarketsWhat Brent and WTI each specify, why two benchmarks exist, and what their differential measures.
- The Central Bank of the UAE and the dirham pegEventsHow the dirham peg is maintained, and why a fixed rate moves rate setting to the anchor economy.
- The Saudi Central Bank and the riyalEventsThe two policy rates the Saudi Central Bank operates, and why they move on the anchor economy's calendar.
- OPEC+ meetings and the production quotaEventsWho is in the group, how it decides, and the difference between a headline quota and actual production.
- Sovereign credit rating reviewsEventsWhat a sovereign rating is and is not, and why outlook and watch carry information the grade does not.
- Gulf trading hours against London and New YorkStructureWhere the Asian, European and American sessions land on a Gulf clock, and why the local hour shifts.
- The Gulf working week against the global market weekStructureHow the regional business week, the exchange week and the global market week fall out of step.
- The dirham peg and dollar exposureStructureWhat a fixed dirham parity does to a quoted pair, and how a peg relocates an exposure, not removes it.
- The Saudi riyal pegStructureThe shape of the riyal's fixed rate arrangement, and where pressure is priced when spot cannot move.
- Gulf currency regimes comparedStructureWhich Gulf currency runs which arrangement, and why the region's monetary union was never completed.
- Oil as the regional macro driverStructureThe chain from a barrel price to Gulf bank liquidity and equities, and why the currency never shows it.
- Gulf equity markets and index inclusionStructureThe Gulf exchanges, the criteria index providers assess, and what a reclassification mechanically does.
- Ramadan and Eid market hoursStructureHow the lunar calendar moves the shortened month and its holidays, and what accrues while desks are shut.
- Gulf public holidays and thin liquidityStructureThe two kinds of Gulf holiday, which closures reduce global liquidity, and what a thin book does.
- Trading dollar denominated markets from the GulfStructureWhy the account currency question resolves differently in the Gulf, and where a conversion still appears.
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