Central Bank turns tables on money changers

Yesterday's post was entitled Money changers throw out the dollar. Anticipating a revaluation, UAE money changers were not willing to buy dollars at the official rate.

The Central Bank is now saying the money changers must defy the law of gravity (r.e., the market forces of supply and demand), and obey the official rate. The Gulf News reports:

The UAE Central Bank on Monday directed money exchange houses to refund to their clients any differences arising from purchasing US dollars at rates outside the official band on the weekend.

The Central Bank has asked persons involved to approach its Dubai office with original invoices within a month. "The Central Bank will arrange with the money changers to send the difference amounts to their addresses," the statement said.
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Exchange firms widened the spread between the dollar's buying and selling prices to Dh3.35 and Dh3.685 respectively on December 1 and 2, compared to the rates prevailing on the previous day of Dh3.65 and Dh3.68 set by the commercial banks.
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[T]he central bank considered the move a clear violation of its regulations and warned exchange firms of severe penalties if it happens again.

There's no statement about what the severe penalties would be, or why -- given that the regulations were so clear -- there were no penalties this time.

What will happen when the money changers must choose between a regulatory penalty and the penalty of financial lost? They might simply close their exchange window.

Meanwhile, the two day summit of GCC leaders has concluded with no dollar announcement:

[T]he final communiqué, to be released later, will not make reference to the burning issue of the declining US dollar to which most Gulf currencies are pegged, official here have said.