ADCB urges UAE to ditch dollar peg

DROP PEG: Knox said the UAE should reconsider its link to the dollar.

The UAE, the world's fifth-largest oil exporter, should reconsider its peg to the dollar, one of the country's largest banks said on Monday, as the US currency slides to a record low against a basket.

"The dollar peg has served the economy well, historically, but it may be wise to reconsider it in light of the long-term growth prospects in the region," said Eirvin Knox, chief executive officer of Abu Dhabi Commercial Bank (ADCB), the third-largest lender by market value in the Gulf Arab emirate.

The UAE is one of five nations in the world's biggest oil-exporting region that pegs its currency to the dollar.

The dollar slid to a record low against a basket of currencies on Monday on fresh worries about the health of US financial firms and fears of a US recession stoked expectations of aggressive rate cuts.

The dollar also hit a three-year low against the yen, below 103, and an all-time trough against the Swiss franc, as investors rushed to unwind leveraged carry trades in which funds are borrowed in those low-yielding currencies to buy higher-yielding assets.

The dollar peg has served Gulf economies "very well" and helped the region prepare for monetary union, the UAE central bank Governor Sultan Nasser Al-Suweidi said last week.

Suweidi said in November he was under mounting social and economic pressure to revalue the UAE dirham or drop the peg altogether as inflation surges in the second-largest Arab economy.

The peg forces Gulf Arab oil producers - except Kuwait which pegs its currency to a basket - to follow the US in lowering interest rates at a time when Gulf economies and inflation are surging on a five-fold increase in oil prices during the last six years. (Reuters)

Saudi real estate giant calls on UAE to drop dollar peg
Depegging from US currency will help fight inflation, Rakaa Properties CEO says.

Ditching peg will ease inflation - Greenspan
Former Fed chairman says free-floating currencies will ease inflation 'significantly'.

Print | Email | Discuss this article |

USER COMMENTS (0 COMMENTS)

POST A COMMENT

CLICK HERE TO POST A COMMENT

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.