UAE sticking with dollar peg - Sheikh Mohammed

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DOLLAR PEG: Sheikh Mohammed said the UAE would not change its monetary policy.

The UAE will maintain the dirham's peg to the tumbling US dollar despite record inflation, Dubai's ruler told ArabianBusiness.com on Tuesday.

Speaking on a flight from Beijing to Shanghai, Sheikh Mohammed bin Rashid Al Maktoum, also vice president and prime minister of the UAE, said the high inflation currently plaguing the UAE economy was only temporary.

Sheikh Mohammed said inflation, which hit a 19-year high of 9.3% in 2006, would settle back down to normal levels, without saying when that would be or what normal levels were.

When questioned about his views on the currency market, he said: “What you are trying to ask me is if I am going to stick with the dollar. Why are you running around the bush asking different questions?… Of course, I will stick with the dollar.”

However, Sheikh Mohammed disclosed that he has established a committee of experts to look more closely at the advantages and consequences of maintaining the dollar peg.

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Will Stick with Dollar Peg, but re-value a possibility?
Posted by brandaid, Dubai on Wednesday 2 April 2008 at 12:04 UAE time


Interesting what he didn't say, he didn't say they won't re-peg the dollar, which is the most likely and politically astute move. After President Bush visited it was obvious that the UAE would maintain the peg to the dollar as it would be highly unlikely for the GCC and OPEC to change the currency that oil is traded in and insult their largest customer. The USA, despite claims to the contrary is highly engaged and supportive of the GCC Countries, their rulers and their economies and if the GCC were to change the currency peg to the Euro or a basket of currencies as a group, this would have dire consequences for the dollar and the US Economy and the investments that the GCC maintains in the USA. Revalue is likely, dropping the peg at this stage is not realistic.

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