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Wed 18 Nov 2009 01:43 PM

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Saudi cenbank says USD peg beneficial - paper

The US dollar is still the main reserve currency globally, SAMA chief says.

Saudi Arabia's currency peg to the US dollar "benefits" the Kingdom and will remain as long as the greenback remains the main reserve currency globally, the central bank governor was quoted as saying on Wednesday.Muhammad Al Jasser's remarks were published in Arabic daily Alrroya Aleqtossadiya.

"The US dollar is still the main reserve currency globally. Pegging the Saudi riyal to it benefits the Kingdom until a major rival (currency) appears," Jasser told the Saudi newspaper.

The greenback has dropped to a 15-month low against a basket of six major currencies this week, prompting a rare comment on its value by US Federal Reserve Chairman Ben Bernanke on Monday.

The peg issue is gaining momentum again as the dollar retreats and oil prices recover, helping economies in the world's top oil exporting region emerge from a downturn.

On Tuesday, Kuwait - which dropped its dollar peg in 2007 in favour of a currency basket which includes the greenback -- said that Gulf Arab countries will discuss pegging their planned single currency to a basket instead of the US dollar.

The newspaper also quoted Jasser as saying that "Saudi Arabia's fiscal reserves remain high."

"We have not encountered any financial problems and are still in a very comfortable position and do not need to issue any debt instruments at present," Jasser said.

The Saudi central bank, known as the Saudi Arabian Monetary Authority (SAMA), kept interest rates unchanged in the third quarter, viewing a further rate cut as unlikely to spur lending while a rate hike was unnecessary given tepid inflation.

"Saudi's monetary policy fits the current circumstances, and reducing the basic lending rates was an attempt to curb the impact of the financial crisis," Jasser said in the newspaper on Wednesday, adding that the authority will take "adequate measures to ensure stability." (Reuters)

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