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UAE to keep US dollar peg

The UAE central bank governor said today he was committed to maintaining a peg to the dollar after Kuwait threw Gulf Arab monetary union plans into disarray by abandoning its dollar peg on Sunday.

"We are committed to a decision by Gulf leaders to keep currencies pegged to the dollar at a fixed rate," Sultan Nasser al-Suweidi told reporters in Kuwait.
After Kuwait, the UAE was the most likely candidate to loosen a dollar peg, which the six oil producers had agreed would stay in place until monetary union in 2010, according to analysts polled by Reuters in March.

The goal of monetary union was still realistic, Suweidi said.

Earlier today, UAE prime minister Sheikh Mohammed bin Rashid al Maktoum said that the UAE government has not discussed changing its currency policy after Kuwait dropped the dinar's peg to the dollar.

"My government has not discussed a change," Bloomberg quoted the prime minister as saying in the South Korean capital, Seoul.

"No, we haven't thought (of de-linking the UAE dirham from the dollar). We're still sticking to the dollar for the time being," he told reporters.

The remarks come after speculation that the Emirates, and neighbouring Qatar, would also drop the dollar peg in a bid to curb inflation and strengthen their currencies, following the move on Sunday by Kuwait to shift its currency and adopt an exchange rate based on a basket of currencies.

Qatar Central Bank governor Sheikh Abdullah bin Saud al-Thani ruled out on Monday any change of exchange rate policy. He has said the country is still working towards monetary union, although meeting the 2010 deadline was not crucial.

The central banks of Saudi Arabia, the largest Arab economy, Oman and Bahrain did the same on Sunday.

Media reports had stated that a revaluation of the UAE currency has become more likely after Kuwait's move, which was attributed to mounting domestic inflation.

After Kuwait, the UAE was the most likely candidate to loosen a dollar peg which the six oil producers had agreed would stay in place until monetary union in 2010, according to analysts polled by Reuters in March.

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