The UAE said on Wednesday the dollar’s decline against the world’s major currencies is temporary and the Gulf Arab oil producer remains committed to keeping its peg to the US greenback.
“I don’t think the situation is a permanent one,” UAE Central Bank Governor Sultan Nasser Al-Suweidi told reporters in Dubai. “It is a temporary phenomenon.”
The dollar hit a record low against the euro for the fifth trading day in a row on Wednesday, fuelling speculation that Gulf Arab states might revalue their currencies.
The UAE’s Gulf partner, Saudi Arabia, on Wednesday ruled out revaluing its dollar-pegged riyal, dampening speculation it might strengthen its currency that rose to a 21-year high after it held back from matching last week’s US interest rate cut.
Five Gulf states from the world’s biggest oil exporting region – Saudi Arabia, the UAE, Qatar, Oman and Bahrain – peg their currencies to the dollar, a policy that has helped fuel inflation in the region to near record high as some import prices rise.
“We are in a political agreement among GCC countries since December 2001 to have a currency peg policy for the purpose of aligning GCC currencies,” Suweidi said. “We are committed to this policy.”
The GCC, set up 26 years ago, groups the five states and Kuwait into a political and economic bloc. They have agreed to create a free trade area and introduce a single currency by 2010.
Suweidi said the six countries were “mid-way” through aligning their currencies with a view to adopting a single unit, without being more specific.
The UAE is the Gulf Arab oil producer most likely to revalue its currency, and is more likely to do it next year than this, a Reuters poll of 17 economic analysts showed this month. – Reuters
Follow us on
