By John Irish
Emirates committed to keeping dirham tied to US currency, central bank governor says.
The UAE is committed to keeping its currency tied to the dollar, its central bank governor said in remarks published on Thursday, a day after the dollar hit a record low against the euro.
Sultan Nasser Al-Suweidi said the dollar "was heading towards a rise, therefore it is illogical to talk now about dropping the link of the dirham to the dollar", according to paraphrased remarks reported by Al-Ittihad newspaper.
The dollar slid to a record low beyond $1.51 to the euro on Wednesday on growing concerns the world's largest economy is headed for a recession.
Dollar pegs restrict Gulf countries' ability to fight inflation by forcing them to shadow US monetary policy at a time when the Fed is cutting rates.
Former US Federal Reserve chairman Alan Greenspan said earlier this week near-record Gulf Arab inflation would fall "significantly" were the oil producers to drop their dollar pegs and float their currencies freely.
Al-Suweidi said the link to the dollar was not the only reason behind spiralling inflation.
"Greenspan was proposing several scenarios to reduce pressure on Gulf economies which are suffering from a rise in the level of inflation for several domestic and foreign reasons... not exclusive to their currencies' peg to the dollar."
"The link has led to more capital flows to Gulf [Arab economies]. The countries of the region have witnessed more commerce and more business activity. It also helped prepare for the [Gulf] monetary union," the paper quoted Al-Suweidi as saying.
Gulf economies, which are aiming for monetary union, have been surging on a near five-fold rise in oil prices since 2002. (Reuters)
Keep the peg, but at least re-value the dirham against the dollar with a 1 time change. Everyone in the UAE is taking a financial hit because of the currency problem whether they realize it or not. Restaurants & retail outlets are raising prices because they must pay more for labor. We need some relief! Someone needs to do something!!!
I believe the U.A.E. should at least revalue the Dirham which is presently hurting most employees particularly from the sub-continent. It is getting very difficult to bring in workers from the sub-continent as Indians in particular can presently make similar wages back in India without housing and food which they do not really need in India as most of them have homes no matter how small and food is cheap in India. The food and accommodation being given in labour camps have a lot in question and do not make it attractive for workers as they did in the past. So either wages must go up to compensate for hard working conditions in the U.A.E. or the Dirham revalued so workers can get the benefit of sending more money home to their loved ones.