Dinar hits fresh 19-year high against dollar

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Kuwait allowed the dinar's reference rate against the dollar to rise to a new 19-year high on Sunday after the US currency fell to fresh lifetime lows on global markets on expectations of a US interest rate cut.

The dinar will trade around a mid point of 0.27720 per dollar, compared with 0.27760 per dollar, the central bank said, allowing an appreciation of 0.14%.

The currency of the Middle East's fourth-largest oil exporter has risen 4.31% since May 19, a day before the central bank dropped its peg to the weakening dollar and adopted a basket of currencies. Kuwait has declined to give the composition of the basket.

The central bank says the dollar's decline on global markets is driving up inflation and making some imports more expensive. The US currency hit a record low in July against the euro in which Kuwait pays for more than a third of its imports.

In late New York trade on Friday, the dollar was down 0.49% at 1.4391 euro, extending losses against the European currency this year to 9.06%.

Against a backdrop of weak economic data and hefty losses by the country's big financial institutions, US interest rate futures were fully reflecting a 25-basis-point cut in the Federal Reserve's benchmark rate to 4.50%.

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DINAR'S GAINS
Posted by Buddhadeb Mookerjee, Dubai, UAE on Sunday 28 October 2007 at 17:00 UAE time

Kuwait is proving the proverb "fortune favours the brave" right. It is high time that the rest of the countries in the region take lessons from Kuwait and free themselves from the dollar's shackles. The procrastination is already proving very expensive.

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