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Wed 15 Jul 2009 05:41 PM

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UAE central bank may buy more Dubai bonds - report

UAE central bank governor says the UAE economy may contract in 2009.

The UAE central bank may buy into the second tranche of Dubai's $20bn bond programme after buying the first tranche earlier this year, its governor was quoted as saying on Wednesday.Sultan Nasser Al Suweidi also said the UAE economy may contract in 2009, according to news agency Bloomberg.

"Maybe, if our board decides, we will buy part of them and, of course, start trading these bonds very soon," Suweidi told Bloomberg Television, according to the agency's website.

Dubai sold $10bn of bonds to the UAE central bank earlier this year to raise funds to support state-linked companies suffering from the financial crisis, and plans to issue another $10bn later this year.

"We do believe that there will be contractions this year," Suweidi said about the UAE economy, according to Bloomberg.

The central bank governor also said he was reassured about the US dollar after a visit by US Treasury Secretary Timothy Geithner.

"It's very important to give realistic committal messages to the international markets," he was quoted as saying on the Bloomberg website.

"I would say he's done that," Suweidi said.

Suweidi was quoted as saying he was reassured, adding: "We always emphasise that we will continue to peg the dirham to the US dollar."

Geithner, offering assurances on the United States' ability to pull out of recession, is combining a visit to Saudi Arabia and the UAE, the Arab world's largest and second-largest economies, with a trip to Europe.

China and Russia have expressed concerns about the weakened US currency staying as the only dominant reserve currency, although Beijing, which itself holds large quantities of US assets, suggests any change would be a long-term affair. (Reuters)

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