Kuwait let the dinar rise for the fifth time in a week on Tuesday after the dollar slid to a fresh two and a half year low against the yen on expectations that credit worries would lead to more US rate cuts.
The dinar will trade around a mid point of 0.27390 per dollar, compared with 0.27405, the central bank said, allowing an appreciation of 0.05%.
The Kuwait currency has risen 0.83% since last Wednesday, when it recorded its biggest single-day rise since July 25. The dinar is now at its highest since May 1988.
In late New York trading on Tuesday, the dollar fell 0.97% against the yen and 0.29% versus the euro on worries about the US economy and expectations for an additional Federal Reserve interest rate cut.
Investors also kept up pressure on Gulf Arab central banks to let their currencies appreciate, expecting that dollar weakness and inflation will force them to move.
Bahrain cut interest rates on Monday, the third Gulf Arab state in five days to lower borrowing costs as they seek to relieve pressure on their dollar-pegged currencies. The Saudi riyal hit a new 21-year high on Monday.
The Kuwait dinar, the currency of the Middle East’s fourth-largest oil exporter, has risen 5.56% 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.
Kuwait’s 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. (Reuters)
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