Thursday, December 06, 2007

Governor: "No need for revaluation"

Gulf News
Frankfurt: The UAE central bank said yesterday it would leave its dollar peg unchanged for the "foreseeable future" after Gulf rulers agreed to keep any currency reform talks secret to calm markets.

UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi, who complained last month he was under growing pressure to drop the peg and track a currency basket, said yesterday there was no need to allow the dirham to rise against the tumbling dollar.
The remarks were Suwaidi's first since a Gulf Arab summit overshadowed by disagreement on currency reform between Saudi Arabia and the UAE, the two largest of six economies preparing for monetary union as early as 2010.
Al Suwaidi had nourished market expectations that the UAE and some of its neighbours would change currency policy when he said in a Tokyo speech last month the dollar's decline had taken his country to a "crossroads" on dirham policy.

In a subsequent interview, Al Suwaidi said he was under pressure from "communities and companies" to drop the peg and track a currency basket.
Saudi Arabia dismissed any suggestion of an end to its dollar peg at the summit which ended in Qatar on Tuesday.
As if to confirm we see this late morning update now at Gulf News:
Published: December 06, 2007, 10:15

Dubai: The UAE Central Bank has cut its main interest rate by 15 basis points to 4.5 per cent. The move brings the UAE into line with the US Federal Reserve's benchmark interest rate. Analysts say it is a clear sign that the UAE is sticking with the dollar peg.
Yesterday Marios Maratheftis, head of research for the Middle East at Standard Chartered was quoted as saying, "Within the next two months, the GCC will likely revalue" said yesterday. ... "The question is whether or not they will drop the pegs - ultimately a political decision."



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