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UAE money supply hits 5-year peak

United Arab Emirates money supply growth hit almost 40 percent in March, its fastest pace in at least five years, signalling that inflationary pressures in the second-largest Arab economy will continue climbing.

M3, the broadest measure of money circulating in the second-largest Arab economy, rose 39.82 percent to 754.57 billion dirhams ($205.4 billion) on March 31, compared with 539.67 billion dirhams a year earlier, the central bank said on its website.
That was the sharpest rate of money supply growth since at least 2003, according to central bank data.

Narrow money (M1), the category of money supply that includes all physical money and funds held in current accounts, surged 63.2 percent to 221.86 billion dirhams, the data showed.

Broad money, which consists includes M1 and quasi-monetary deposits, grew 42.5 percent to 624.36 billion dirhams, the central bank added.

Investors piled into UAE dirhams beginning late last year on expectations that the oil producer would drop its dirham's peg to the dollar as the US currency tumbled to record lows against the euro and a basket of major currencies.

The UAE's dollar peg has forced it to track US interest rate cuts even though its economy is surging on a near seven-fold rise in oil prices since 2002.

Inflation in the UAE hit a 20-year high of 11.1 percent in 2007 and will probably accelerate to 11.8 percent this year, according to a Reuters poll in May. (Reuters)

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