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UAE Dirham Revaluation Likely by July: EFG - ASHARQ AL-AWSAT English Archive
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DUBAI (Reuters) – EFG-Hermes said the United Arab Emirates was 60 percent likely to revalue its dollar-pegged dirham unilaterally or in conjunction with other Gulf oil producers in the first half of next year.

The UAE could allow its dirham to rise between 3 percent and 5 percent “if GCC countries decide to continue coordinating their policies,” the Egyptian investment bank said in an annual country research report.

“A lack of consensus … could lead the UAE to move independently to a currency basket,” EFG said.

Gulf Arab oil producers are considering allowing their currencies to appreciate after agreeing to keep pegs to the dollar, UAE Central Bank Governor Sultan Nasser al-Suweidi was quoted as saying in London-based al-Hayat on December 15.

Suweidi had triggered a spell of intense market speculation about the imminent demise of the Gulf’s fixed exchange rates, after he said last month he was under mounting social and economic pressure to sever the dirham’s dollar peg.

He backtracked on those remarks after Gulf rulers agreed at a summit in Qatar to retain dollar pegs and keep any talks on currency reform secret.

If the U.S. currency were to weaken further and the U.S. Federal Reserve to continue to cut interest rates, the UAE would be more likely to act alone in currency reform, EFG said.

Dollar pegs force the UAE and four of its neighbors, including Saudi Arabia, to track U.S. monetary policy at a time when the Fed is cutting rates to contain the fallout of a mortgage crisis.

Inflation in the Gulf, the world’s biggest oil-exporting region, is hitting decade highs, including a 19-year high of 9.3 percent in the UAE last year.

Price rises would accelerate to a new 19-year high of 10.1 percent this year, a Reuters poll showed this month.

Last week, the U.S. currency climbed to six-week peaks against the yen and two-month highs versus the euro and a basket of currencies.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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