Gulf Arab currencies eased on Monday after the six oil producers put off a decision on when to aim for monetary union until a regional summit, taking pressure off their dollar-pegged exchange rates.
The United Arab Emirates dirham and Bahrain dinar fell off one-month highs touched on Friday when investors were betting a weekend meeting in Saudi Arabia would formally delay a 2010 deadline to create a single currency.
But Gulf central bank governors and finance ministers agreed on Saturday in the Saudi city of Jeddah that they would leave that decision to Gulf rulers.
All six states have said the 2010 deadline would be difficult to meet, triggering market speculation that the UAE and other neighbours would drop their pegs to the tumbling dollar as Kuwait did in May.
“People are fed up that nothing is happening and the date is getting pushed back,” said a treasury manager at Emirates Bank International Ltd in Dubai, asking not to be identified.
“These governors are not giving anything concrete so investors are reversing their positions.”
Bids on the UAE dirham were at 3.6718 per dollar at 1400 GMT compared with a peak of 3.6700 on Friday, their highest in more than a month.
Deutsche Bank said on Monday it expected the UAE revalue the dirham next year rather than in 2007. In September bank was forecasting a dirham appreciation of as much as 3% in three months.
“It has long been our view that an official delay to the proposed common currency will open up more scope for currency realignment across the Gulf,” Deutsche said in a note on Monday.
“With the official delay now likely to be announced late in the year, we push out our call for a move in the dirham into 2008,” it said.
The decision on any delay may even have to wait until the end of 2008.
Gulf rulers will decide the final monetary union timetable next year, and not at a summit in Qatar in December, Saudi newspaper al-Riyadh on Monday quoted an unnamed Gulf Cooperation Council (GCC) official as saying.
GCC spokesman Mohamed Mazrooei declined to comment on the report.
The GCC is a regional economic and political bloc comprising Saudi Arabia, the United Arab Emirates, Qatar, Oman, Bahrain and Kuwait. The rulers of the six states meet at the end of every year.
Saudi Central Bank Governor Hamad al-Sayyari told reporters on Saturday he and other regional policymakers had agreed to leave the decision on whether to delay monetary union to rulers at their annual summit.
The rulers meet next in December, but Sayyari did not make clear when the decision would be taken.
The dirham had hit a five-year high last month as speculation Saudi Arabia, the world’s largest oil exporter and the region’s biggest economy, might revalue its currency spilled into regional foreign exchange markets.
The Saudi riyal fell to 3.7375 per dollar, after hitting a high of 3.7350 on Friday. The latest 21-year peak, hit on Oct. 10, was 3.7290.
Bahrain’s dinar traded below the one-month high struck on Friday, when bids were as strong as 0.37660.
Bids on the Oman rial fell to 0.38480 per dollar at 1350 GMT, down from 0.38416 on Friday.
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