Tuesday, November 20, 2007

GCC currencies and the dollar drama

'Independent decisions likely' on currency peg - "The Gulf states are discussing the issue of regional currency pegs to the dollar and ideally there should be a regional consensus at the GCC level, failing which many countries are likely to take independent decisions, said Dr Omar Bin Sulaiman, Governor of the Dubai International Financial Centre."

UAE keeps up pressure for dollar peg review - "The Saudi riyal hit a 21-year high and investors bet on an appreciation of 2.4 per cent in a year after a source familiar with Saudi policy said the kingdom could consider its first revaluation since 1986."

Tools limited in inflation fight - ' "Since January 2001 and until September 2007, the dollar lost around 32 per cent of its value against the euro and 27 per cent of its value against the British pound. Imports from these countries constitute around a third of our total imports. Since the dirham is pegged at a fixed rate to the dollar, the prices of imports from these countries have risen in dirhams, leading to imported inflation," the UAE Ministry of Economy revealed in a report yesterday.'

Saudi Riyal Touches 21-Year High - "UAE Central Bank Gov. Sultan Nasser Al-Suweidi said last week he too could start tracking a currency basket including the euro, but would only act along with Saudi Arabia and three other oil producers preparing for monetary union as early as 2010. The UAE is under mounting social and economic pressure to drop the peg, Suweidi said on Thursday in an interview that drove the dirham to a five-year high."

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3 Comments:

Anonymous Anonymous said...

The UAE will eventually encounter a significant dilemna when they consider the dollar peg.

Operationally - there's lots of reasons to adjust the peg against the dollar.

What a lot of people are overlooking, though -- is the immense reserves that Abu Dhabi and and Dubai have built -- that are invested in significant proportions in USD denominated investments.

I'm not sure I'd support re-pegging if I worked for ADIA, Mubadella or Dubai Capital.

11:15 AM  
Anonymous Anonymous said...

Yesterday, ADIA bought a 5% stake in Citibank.

Can't imagine them letting the dollar peg adjust more than about 5%.

8:50 AM  
Anonymous Anonymous said...

שער הדולר היציג

10:19 AM  

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