http://cartmanist.wordpress.com/2008/01/31/qatar-on-cusp-of-breaking-dollar-peg/
Qatar on cusp of breaking dollar peg
<http://cartmanist.wordpress.com/2008/01/31/qatar-on-cusp-of-breaking-dollar-peg/>
January 31, 2008 by E. Cartman
<http://cartmanist.wordpress.com/author/jforshaw/>
As Bernanke immolates his credibility by insisting that inflation
remains contained, the dollar union is cracking up. The Gulf sheikdoms,
which have all been pegged to the dollar for decades, are tired of
double-digit and rising inflation so that they can maintain an
antiquated currency peg with an obviously politicized
<http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=198888&version=1&template_id=48&parent_id=28>
central bank.
"Kuwait really did very little," al-Ibrahim said.
His comments helped the euro strengthen against the dollar. The US
currency fell to a two-week low against a basket of major currencies
yesterday ahead of a US interest rate decision later in the day.
"The comments are very sensible. Any currency reform needs to be
substantial," said Marios Marathefis, Standard Chartered's regional
head of research. Gulf states should allow their currencies to
appreciate by 20% against the dollar, he said late last year.
Simon Williams, senior economist at HSBC, said: "The comments are a
very strong sign that the Qatari authorities are seriously examining
all of their policy options to deal with inflation, including
monetary reform."
Qatari officials will make foreign-exchange policy recommendations
to the government of HH the Emir Sheikh Hamad bin Khalifa al-Thani
this year, including possibly a call to revalue the currency,
al-Ibrahim said, without saying exactly when.
"We are studying all kinds of possible ways to price our exchange
rate or to price our currency," said al-Ibrahim, who heads Qatar's
General Secretariat for Planning. "The government is willing to look
into these alternatives," al-Ibrahim said.
Qatar currently holds the chair of the GCC which ispreparing for
monetary union as early as 2010. "Really, we would like to do
everything we can through the GCC," he said.
"As a small country we cannot float our currency ... it has to be tied."
Still, when asked if Qatar could act unilaterally, he said: "I think
we can."
Gulf states are constrained in their fight against inflation because
dollar pegs force them to track US monetary policy at a time when
the Federal Reserve is cutting rates.
Gulf currencies rallied last year after the UAE called for the
region's central banks to sever their dollar pegs.
Saudi Arabia dismissed the idea and the Gulf states agreed last
month to retain their dollar pegs and keep any talks on currency
reform secret.
Qatar, which is contending with the region's highest inflation rate,
reopened the debate last week when its finance minister said that
Gulf states could consider revaluing their currencies together at
some stage to fight inflation.
The central bank, the General Secretariat for Planning and a state
inflation committee are debating several policy options, al-Ibrahim
said, after inflation hit 13.73% in September.
