Forex News

Kuwaiti Finance Minister has said that the Gulf Cooperation Council countries, U.A.E., Qatar and Bahrain specifically, are planning to scrap their currencies’ peg to dollar soon.

The United Arab Emirates government has established a new committee, which purpose is to study the possibility of scrapping the dirham’s peg to the U.S. dollar and the reasons to maintain this peg.

The government of Dubai, U.A.E. largest emirate, is against the currency revaluation and is pro dirham’s peg to the U.S. dollar, according to Sultan Ahmed bin Sulayem, the member of the Dubai’s Board of Executive Council.

Financial experts from the Standard Chartered PLC expect a coordinated scrapping of the peg to the U.S. dollar from the monetary authorities of the Middle Eastern countries - Saudi Arabia, U.A.E., Qatar, Oman and Bahrain.

The United Arab Emirates decided to cut their bank repository rate by 0.25% to 5.25%; Saudi Arabia decreased its benchmark rate for deposits also by 0.25% to 4.0%; Qatar and Bahrain reduced their deposit rates by the same amount - 0.25% to 4.0%. Kuwait refrained from changing the country’s interest rate, because they’ve already removed their currency’s peg to dollar back in May 2007.

United Arab Emirates and Qatar may drop their currencies’ pegs to dollar without waiting for their GCC partners, Omar Bin Sulaiman the governor of the Dubai International Financial Centre said. Increased pressure from that falling dollar, wounded by the mortgage crisis in U.S., inflicts vulnerability on these Middle Eastern oil exporting countries.

Sultan bin Nasser al-Suwaidi, Central Bank Governor, said in Gwacheon, South Korea, today that U.A.E. will end the dirham’s peg to the U.S. dollar, if it will continue further to depreciate against euro. U.A.E. dirham’s peg to the dollar is almost 30 years old; it started in 1978 and will be probably stopped this or next year.