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Gulf interbank lending rates rise amid tensions

Interbank lending rates in Saudi Arabia and the United Arab Emirates marched higher on Monday as liquidity conditions tightened amid tensions ahead of a possible final US bailout agreement.

In Saudi Arabia, one-month rates hit 4.05750 percent, continuing a steady rise begun in early May.
In the UAE, one-month rates rose to 4.18750 percent compared to 3.95625 percent on Sunday.

Last week, the UAE central bank said it would offer banks short-term funds through a 50 billion UAE dirham ($13.61 billion) facility in an emergency move to ease tensions in money markets as it sought to stave off the global credit crunch.

The UAE is the only Gulf state to announce such a measure, but bankers have called on others to follow suit.

Banks in the Gulf have been suffering from a liquidity shortage caused in part by an exodus of foreign money after Gulf states said they would keep their dollar pegs, quashing market bets their currencies could be revalued to fight inflation. (Reuters)

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