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Deutsche Bank disputes revaluation report
A UAE newspaper report which stated that GCC currencies face an 'imminent' revaluation of up to 30% is erroneous, according to Deutsche Bank, the authors of a study on which the newspaper report was based.
Today's Khaleej Times claims that Deutsche Bank AG is predicting that the UAE dirham and Bahrain dinar 'would be revalued by between 10 and 15 per cent', and that the Saudi and Oman currencies 'could be revalued by 25 to 30 per cent'.
However, Deutsche Bank's Caroline Grady, who wrote the report, says that the newspaper has misinterpreted the figures and says that such a revaluation is extremely unlikely.
"[The figures quoted] are our fair value estimates. It doesn't mean that we think they'll revalue by that much. No-one expects the currencies to revalue by that," Grady told ArabianBusiness.com in a telephone interview.
"Kuwait's the only one on which I have a strong view on revaluation."
This is the prevailing view held by other analysts based in the region. "There are fundamental arguments for a revaluation, but Kuwait is the most likely," said one.
Standard Chartered Bank in Dubai is predicting a 1% revaluation of the Kuwaiti dinar in the second quarter of this year. The currency was revalued by 1% against the dollar last May.
"We believe that Saudi Arabia is committed to the peg at 3.75 [riyals to the US dollar]," says Steve Brice, Standard Chartered's Regional Head of Research, MEPA & South Asia.
"We've been arguing that currencies should be floated, but a lot of work needs to be done before then. The pegs look like they're here to stay, apart from in Kuwait," continued Brice.
Another analyst, also based in Dubai, also downplayed the Khaleej Times report. "At first glace, my heart jumped; at the second, I thought 'oh dear '," the analyst told ArabianBusiness.com.
"There is a significant possibility of a Kuwaiti revaluation within the next couple of months. The UAE is also worth watching; the others, I don't think so."
Gulf leaders will discuss the US dollar currency peg at a meeting in Saudi Arabia next month. Speculation about a revaluation centres on the 10% fall in the dollar against the euro last year.
However, most of the GCC countries - with the exception of Kuwait and the UAE - have downplayed the possibility of immediately dropping the peg to the dollar.
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