http://www.bruneitimes.com.bn/details.php?shape_ID=16941
Gulf Arabs review currency pegs to dollar
ABU DHABI
13-Jan-07
GULF Arab oil producers are reviewing currency pegs to the falling dollar
and could decide as early as March whether to keep or change their exchange
rate regime, the United Arab Emirates central bank said.
Governors of the six Gulf central banks will meet in March in Saudi
Arabia and may agree to switch to another currency or currency basket, Governor
Sultan Nasser al-Suweidi said. They may decide to leave the pegs as they are
and any changes would have to be approved by Gulf Arab rulers, he said.
"We might come up with a decision that says we are OK and stick to the
same (regime), or we could come to the conclusion that we need to change,"
Suweidi told Reuters in an interview.
It was the first acknowledgement that the Gulf might not stand by a
currency regime designed to prepare for monetary union in 2010, although
markets began speculating about a revaluation last year as the US dollar fell
around 10 per cent against the euro.
However, achieving consensus will not be easy in a region that is
squabbling over how and when to adopt a single currency. Oman dismissed any
suggestion of a Gulf-wide revaluation.
"Oman has no intention of changing its peg. No intention of revaluing its
currency," Central Bank Executive President Hamood Sangour al-Zadjali told
Reuters by telephone from Muscat.
Suweidi's comments pushed up currencies across the world's top oil
exporting region with the UAE dirham hitting a two-week high of 3.6720.
"It removes the assumption most of the market has held, that this
(revaluation) couldn't happen before a single currency," said Steve Brice,
regional head of research at Standard Chartered.
The six members of the Gulf Cooperation Council (GCC) UAE, Saudi Arabia,
Kuwait, Qatar, Oman and Bahrain are working towards monetary union, although
Oman plunged said it would not join in 2010.
"Changing the peg is a GCC decision. We went into it together. We will go
out of it together," Suweidi said.
Suweidi said the governors could opt for more flexible exchange rates,
instead of the fixed pegs now maintained by all states except Kuwait, which
revalued its currency last year.They may decide to peg to another currency or
basket of currencies, he said, declining to comment on what currencies were
being considered.
Reuters
