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Wed 2 Jan 2008 10:33 AM

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Kuwait lets dinar fall following dollar rally

Gulf state allows dinar to drop on first trading day of New Year, after dollar made gains against euro.

Kuwait allowed the dinar to fall on Wednesday, the first trading day of the New Year, after the dollar rallied against the euro.

The dinar will trade around a mid point of 0.27310 per dollar, compared with 0.27300, the central bank said, allowing a depreciation of 0.04%.

Kuwait allowed the dinar to make its biggest daily gain since November 21 on Sunday as the dollar fell on global markets. The dinar currency, which also rose 0.26% on Thursday, is just off its highest level since May 1988.

In late New York trading on Monday, the dollar gained 0.85% on the euro and 0.61% versus the Swiss franc.

The US currency made its biggest annual decline in four years against a basket of major currencies in 2007 on expectations the Federal Reserve will have to lower interest rates further to stave off a recession.

The currency of Kuwait, the Middle East's fourth-largest oil exporter, has risen 5.87% since May 19, a day before the central bank started tracking a basket of currencies. Kuwait has declined to give the composition of the basket.

Kuwait's central bank said the dollar's decline on global markets was driving up inflation and making some imports more expensive. Kuwait pays for more than a third of its imports in euros. (Reuters)

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