ABU DHABI, (Reuters) – The United Arab Emirates would only make changes to its dirham’s dollar peg in conjunction with its Gulf Arab neighbours, the Gulf state’s central bank governor said on Tuesday.
“If there is any change about the dollar peg, it has to be done at the GCC level,” Sultan Nasser al-Suweidi at a seminar in the UAE capital, Abu Dhabi, in response to a question about what the Gulf state planned to do with its currency policy.
“There is nothing new on the issue,” he said, without elaborating.
The UAE, Saudi Arabia and three other states in the world’s biggest oil-exporting region are preparing for a single currency as early as 2010.
Investors have been betting that some Gulf oil producers will allow their currencies to appreciate to combat inflation at record or near-record peaks across the region.
Dollar pegs force Gulf states to track U.S. interest rate cuts at a time when the U.S. Federal Reserve is trying to ward off recession while Gulf economies are surging on a five-fold rise in oil prices in the last six years.
Kuwait severed its link to the dollar last May, saying the dollar’s decline on global markets was fuelling inflation. The U.S. currency tumbled to record lows against the euro and a basket of major currencies last month.
Oman, the sixth state in the GCC, or Gulf Cooperation Council, has opted not to join monetary union indefinitely.
In November, Suweidi called for Gulf Arab states to sever their dollar links and start tracking currency baskets including the euro. He has since backtracked on those remarks.