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UAE to maintain dollar peg, says Sheikh Mohammed
Source: BI-ME and agencies , Author: BI-ME staff
Posted: Tue April 1, 2008 12:00 am
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UAE. Sheikh Mohammed bin Rashid Al Maktoum the UAE's Prime Minister said on Tuesday a committee was studying the country's dollar peg, although it would be retained for now.

"A committee is studying this position and they will report to me," Sheikh Mohammed told reporters aboard a plane from Beijing to Shanghai, without giving details.

"Up to now we are still with the dollar," he said in rare comments to the media. "We are still with the dollar of course."

The committee was studying "the benefits of staying with the peg or not". He gave no details on when the study would be completed.

Last month the WSJ reported that the UAE central bank had set up a currency task force to study a possible depegging or revaluation of the Dirham from the US Dollar. "The committee will review the benefits of depegging or revaluing and will help coordinate any future depegging of the UAE currency. It is expected to report its findings to the country's ruler at the end of the year," the WSJ said citing people familiar with the matter.

The pegs restrict the Gulf's ability to fight inflation by forcing them to shadow US monetary policy at a time when the Fed is cutting rates to ward off recession and Gulf economies are surging on a near five-fold jump in oil prices since 2002.

Rifts are growing across the world's top oil-exporting region on how to tackle inflation which hit a 27-year peak of 7.0% in Saudi Arabia in January, 9.3% in the United Arab Emirates in 2006, and a peak of 11% in 2007 according to the most recent figures.

UAE Central Bank Governor Sultan Nasser Al Suweidi said on Tuesday the Gulf state would not change its dollar peg without the agreement of its Gulf neighbours, which also include Saudi Arabia, Qatar Oman and Bahrain.

"In the short term free floating...will not fully dissipate inflationary pressure, although it would significantly do so," Alan Greenspan the former Fed Chairman told a recent investment conference in Jeddah.

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