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Mon 18 Apr 2011 05:16 PM

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UAE's 3-month interest rate may drop by 0.4%

Eibor has eased 2.8% this month after remaining almost unchanged since beginning of the year

UAE's 3-month interest rate may drop by 0.4%
The UAEs three- month interbank interest rate is expected to decline by about 40 basis points, or 0.4 percent, in the next three months as bank deposits rise

The UAE's
three- month interbank interest rate is expected to decline by about 40
basis points, or 0.4 percent, in the next three months as bank deposits
rise, quotes in the interest-rate swap market show.

The three-month
Emirates Interbank Offered Rate for July quoted at 1.65 percent on Monday
compared with the spot Eibor of 2.07 percent, according to Ehsan Ahmed,
Standard Chartered’s head of local currency interest-rate
derivatives trading for the Middle East and North Africa.

The
three-month forward Eibor quoted at 1.9 percent on Friday, and shed 25
basis points since then, Ahmed said. A basis point is one-hundredth of
a percent.

The three-month
interbank rate has eased 2.8 percent this month after remaining almost
unchanged since the beginning of the year as bank deposits in the
second-biggest Arab economy have risen.

The three-month Eibor, the
interest rate banks charge one another for loans, has fallen six basis
points since March 31 to the lowest this year, according to central
bank data on Bloomberg. Through March 31 this year, the Eibor dropped
0.6 percent, or one basis point.

Customer
deposits at the UAE’s 51 banks have risen 2.8 percent this year
through February to AED1.1 trillion ($294bn), compared with
a 6.8 percent rise in 2010, according to central bank data. The banks’
loans-to-deposits ratio eased to 97.2 percent at the end of February
from 103.6 percent at the end of 2009, the data show.

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