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Mon 30 Jul 2007 12:04 PM

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Dropping dollar peg adds flexibility

Central bank governor Sheikh Salem says change allows the exchange rate to track global currency markets.

Changing Kuwait's currency peg from the dollar to a basket of currencies allows the exchange rate to track developments in global currency markets, state news agency KUNA quoted the central bank governor as saying.

Sheikh Salem Abdul-Aziz Al-Sabah told the agency that Kuwait's decision to drop a peg to the dollar in end-May and adopt an undeclared basket of currencies gave it flexibility in setting the dinar's exchange rate.

"This flexibility targeted strengthening monetary stability and keeping track of continuous developments in exchange rates of major currencies in international markets," KUNA quoted him late on Sunday as saying.

He added that decreases and increases in the dinar exchange rate did not mean that the central bank had changed its policy of adopting a basket of currencies.

Kuwait left its dinar rate unchanged against the dollar on Monday for the first time in four working days, keeping its cumulative rise since dropping its peg to the U.S. currency on May 20 to 2.37 percent.

The dinar will trade around a mid-point of 0.28245 per dollar, the central bank said, unchanged from Sunday.

Kuwait, the Middle East's fourth-largest oil exporter, let its currency rise 1.7 percent on Wednesday, before allowing it to decline on Thursday and Sunday.

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