Thread: US 'Supports' Currency Reforms

US 'SUPPORTS' CURRENCY REFORMS:

Analysts have said that the latest International Economic and Exchange Rate Policies report by the US Treasury, also known as the FX Manipulation report, signals approval for GCC currency reforms. The report recognises the inflationary pressures being felt by Gulf countries through the dollar peg, which analysts say may show political support for revaluation.


and

US GIVES GCC 'GREEN LIGHT' TO DROP DOLLAR PEGS:

US investment bank Merrill Lynch believes the US treasury's positive forecast for the dollar and recognition of the inflation problem in the GCC has effectively given Gulf nations approval to drop the dollar peg and track a basket of currencies, reported our sister company Meed. In its new report the bank suggests that the UAE and Qatar will move to a currency basket in the next few months, which would coincide with the dirham and riyal appreciating by 5 percent by the end of 2008. It also expects Saudi Arabia to change its peg to the dollar in 2009.

AME Info, Abu Dhabi, United Arab Emirates, business briefs


Also

INFLATION THREATENS MONETARY UNION:

A report by credit company Fitch Ratings has found that widely varying inflation rates could threaten a 2010 GCC single currency. The variances could hamper decisions such as settling on an international exchange rate. Recent figures place the UAE inflation rate at close to 11 percent, on a par with Saudi Arabia, while Bahrain's inflation figures stand at $5.2 percent.

AME Info, Abu Dhabi, United Arab Emirates, business briefs

This is in the News thread - thought I would pop it in here too.

US dodges issue of Gulf ditching dollar peg
US Treasury Secretary Henry Paulson said on Saturday the dollar peg for currencies in the Gulf Arab countries had served the region well and any changes to the peg would be a sovereign matter.

Dollar pegs in all Gulf Arab states except Kuwait force their respective central banks to match US interest rate cuts, and has helped fuel inflation as their economies are booming due to record oil prices.

This also reduces their purchasing power for goods denominated in other currencies.

Asked about his concerns over the dollar peg, Paulson, on a visit to Saudi Arabia, Qatar and the UAE, told a news conference: "That is a sovereign decision... The dollar peg, I think, has served this country [Saudi Arabia] and this region well. That speaks for itself."

Qatar's top economic policy adviser Ibraham Al-Ibrahim was quoted late on Friday as saying that Qatar must de-link its currency from the dollar peg.

But Saudi Finance Minister Ibrahim Al-Assaf, who joined Paulson in the news conference after a series of meetings, reaffirmed his committment to the dollar peg.

"We have no intention of depegging or revaluation," Al-Assaf said. "As Mr. secretary [Paulson] said... it's a position that has served us well. [The peg to the dollar] has served us well and we look at the long-term interest of Saudi Arabia."

Turning to the price of oil, which hit a record high of more than $135 a barrel last week, Paulson reiterated his calls for additional investment in oil producing countries, particularly from foreign sources, to help increase production.

"There is no doubt that the current prices are a burden on economies around the world and a burden on people around the world," Paulson said.

Al-Assaf agreed, saying Saudi Arabia was investing billions of dollars to increase both upstream crude oil production and downstream refining capacity to help meet global demand.

"We don't like these extreme volatilities in the [oil] market. They are not good for the consuming countries and they are not good for the producing countries."

US dodges issue of Gulf ditching dollar peg - Politics & Economics - ArabianBusiness.com