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UAE, Qatar reiterate support for dollar peg

The UAE and Qatar on Tuesday again reiterated their commitment to keeping their currencies pegged to the dollar.

Both Gulf Arab states also said they expected rising inflation, fuelled by the soaring cost of accommodation in both countries, to decline.
Qatar’s central bank governor Abdullah bin Saud Al-Thani said his country had no plans to depeg its riyal from the US currency, and that measures to control rent rises and other prices will reduce inflation.

"We are committed to the peg and also to the march of the GCC countries towards monetary union," Sheikh Abdullah told Reuters on the sidelines of the Arab central bank governors meeting in Damascus.

"We are taking measures to control prices and rents which would lead to a gradual decrease in inflation," he said.

Inflation will fall to 10% within a year, Sheikh Abdullah added.

UAE central bank governor Sultan Nasser Al-Suweidi also defended the dirham’s peg to the dollar.

"I have always defended the peg to the US dollar because all the basic facts that determine the peg of a currency to another are in favour of the U.S. dollar," Al-Watan daily quoted Al-Suweidi as saying.

Inflation in the UAE, which hit a 19-year high of 9.3% last year, has already started to decline, Suweidi said. Rental costs were behind 80% of inflation, he said.

"The rise in international prices represents 20%," Suweidi was quoted as saying.

The country's trade exchanges are predominately in US dollars, Suweidi added.

Kuwait broke ranks with its Gulf Arab neighbours in May and started tracking a currency basket, saying the dollar's slide on global markets was fuelling inflation by making some imports more expensive.

Kuwait's central bank governor said on Tuesday a decline in the value of the dollar, rising international prices and stronger domestic demand were driving inflation in the Middle East's fourth-largest oil producer.

"From the outside, the increase of prices abroad as well as the impact of the exchange rate fluctuation, and the deterioration of the dollar exchange rate" are underpinning inflation, Salem Abdul-Aziz Al-Sabah told reporters in Damascus.

"The internal factor is increasing aggregate demand," Sheikh Salem said.

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