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"The bank hopes to lower
the dollar share of its foreign currency reserves to a range of between 50 per
cent to 90 per cent," Al Suwaidi said. At present, he said 98 per cent of the
bank's reserves holdings are in US dollars.
UAE may make
decisive shift in dollar reserves
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BY HASEEB HAIDER 31 October 2006 ABU DHABI The UAE Central Bank may cut its US dollar dominated reserves by up to 90 per cent and is looking at other currencies such as the yen, euro and sterling, Sultan Nasser Al Suwaidi, Governor, Central Bank of the UAE, said yesterday. However, he did not elaborate on the topic further.
"The bank hopes to lower the dollar
share of its foreign currency reserves to a range of between 50 per cent to 90
per cent," Al Suwaidi said. At present, he said 98 per cent of the bank's
reserves holdings are in US dollars. The foreign currency reserves of the UAE
currently stand at over $25 billion. The Central Bank is yet to convert 10 per
cent of the total reserves into euros and gold, a decision it took earlier this
year. "It is our investment policy to
diversify the reserves. There are
euro, yen and sterling... We are still waiting for the appropriate time
and circumstances," Al Suweidi told reporters at a briefing after the conclusion
of the two-day conference of GCC central bank governors and head of Monetary
agencies in Abu Dhabi. The GCC central bankers meeting
discussed sovereignty matters relating to monetary union. It agreed that an
explanatory note shall be forwarded, showing the sovereignty concessions GCC
members states will make in case the monetary union is approved. This will
include drawing up and implementation of monetary policy, issuance of the
unified currency and determining exchange rate policy, approval of the
legislation relating to the Union requiring amendments to the national banking,
financial and monetary rules and regulations in line with the GCC
framework. The GCC Central Banks and Monetary
Agencies at a meeting in Abu Dhabi yesterday also agreed on a six-point
memorandum of recommendations on
GCC Monetary Union to be presented to Finance Ministers and Central Banks
for developing a consensus. The outcome will be submitted to the heads of states
at their meeting in Riyadh in December for a final
adoption. "We cannot disclose the
recommendations we have agreed today, until they are presented to the meeting of
GCC Finance Ministers and Central Banks Governors taking place in Jeddah on
November 4-5," Al Suwaidi said. On the subject of the currency-peg
of the future GCC single currency, whose name has not yet been decided, he said
that it would be pegged to US dollar, as per the recommendation of International
Monetary Fund. "The idea is, instead of pegging it
with a basket of currencies, it should be pegged to single currency US dollar,
as at the end it would have a tilt to a single currency," he
explained. Al Suwaidi was of the view that the
ideal thing would be a free float of the GCC single currency. According to plan,
the currency would free float after five years. In reply to a question regarding the
headquarters of the GCC Central Bank in Abu Dhabi, the governor said that Qatar
and Bahrain have also expressed their desire to host the offices of the supreme
body. "Though we were the first, in
offering to set-up the regulatory
institution here...But we respect the desire expressed by two members of the GCC
bloc," he added. In answer to a question about the
prospects of Abu Dhabi in the race for hosting the GCC Central Bank, he said:
"Anything is possible." Al Suwaidi
said the name of GCC Central Bank has also not been yet decided. "It could be
GCC Currency Board or GCC Central Bank." In reply to a question, he said that
GulfStat is being established which would gather information on vital economic
and financial statistics on GCC, on the pattern of European
Union. Complete archives at http://www.sitbot.net/ Please let us stay on topic and be civil. OM
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