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Tue 9 Oct 2007 11:53 AM

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Dinar depreciates for first time this week

Kuwait's central bank allows dinar to drop against dollar after US currency gains on global markets.

Kuwait's central bank allowed the dinar to depreciate against the dollar for the first time this week on Tuesday, after the US currency gained on global markets.

The dinar will trade around a mid point of 0.28025 per dollar compared with 0.28015 the previous day, the central bank said, allowing a decline of 0.04%.

The currency of the Middle East's fourth-largest oil exporter has now risen 3.17% since May 19, a day before
the central bank dropped its peg to the weakening dollar and adopted a basket of currencies.

Kuwait has declined to give the composition of the basket.

By late New York trade on Tuesday the euro was down 0.64 against the dollar. The dollar index, which tracks movements against other major currencies firmed to 78.432, moving further away from record lows of 77.660 set earlier this month.

The central bank says the dollar's decline on global markets is driving up inflation and making some imports more expensive. Kuwait pays for more than a third of its imports in euros.

Central Bank Governor Salem Abdul-Aziz Al-Sabah said on July 29 the basket gave the bank flexibility to track moves on global foreign exchange markets, state news agency Kuna reported.

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