UAE insists dollar peg here to stay

Al-Suweidi, pictured, said there would be no change to the UAE's monetary policy. (Getty Images)

The UAE central bank said on Wednesday 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 Nasser Al-Suweidi, who complained last month he was under growing pressure to drop the peg and track a currency basket, said on Wednesday there was no need to allow the dirham to rise against the tumbling dollar.

"No change is going to take place in the near future, in the foreseeable future," Al-Suweidi told Reuters on the sidelines of a conference in Frankfurt.

Asked if the dirham's exchange rate was going to stay the same, Al-Suweidi said: "Yes, yes. No change. It's better to stay as they are."

The remarks were Al-Suweidi'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.

Bahrain's foreign minister said on Tuesday the six states planned to meet to discuss revaluations. Qatar's prime minister said the rulers would not confirm whether they had discussed currencies at the summit to avoid "scaring markets".

The six GCC states made no reference to dollar weakness or currency policy in their summit declaration, but Qatar's prime minister and other policymakers said they were committed to dollar pegs.

"I think the GCC also believe in the US dollar peg. Everyone is pegging to the US dollar," Al-Suweidi said. "We are all committed to the dollar peg."

Al-Suweidi 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 after south Asian construction workers rioted in Dubai over savings lost to the dollar's slide, Al-Suweidi said he was under pressure from "communities and companies" to drop the peg and track a currency basket.

He said the UAE would only act in concert with its neighbours, unlike Kuwait, which switched unilaterally to a currency basket in May.

Saudi Arabia dismissed any suggestion of an end to its dollar peg at the summit which ended in Qatar on Tuesday. (Reuters)

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