de-pegging from the dollar

The United Arab Emirates' decision to study a possible depegging of its currency from the tumbling U.S. dollar might pressure other countries in the Middle East to follow suit. The central bank of the U.A.E. has set up a committee to study a possible depegging of the dirham from the greenback, according to a report by Zawya Dow Jones on Monday. This committee will help coordinate any delinking of the dirham and is expected to report its finding at the end of the year, the report said.

Gulf states including Saudi Arabia and the United Arab Emirates will be forced to revalue their currency pegs this year following the dollar’s declines and the Federal Reserve’s interest-rate cuts, Bear Stearns has said. Five Gulf nations lowered interest rates last week in step with the US to keep their links to the dollar even as inflation accelerates. When Saudi Arabia left rates unchanged after the Fed’s Sept. 18 reduction, the riyal rose to a 20-year high.

THE GCC summit, which concluded in Doha yesterday, has not taken a decision to drop the dollar peg, but it is for each member state to take appropriate steps to safeguard their currencies, the Prime Minister and Foreign Minister HE Sheikh Hamad bin Jassim bin Jabor al-Thani has said. Talking to reporters after the conclusion of the two-day summit, HE Sheikh Hamad stressed that de-pegging from the dollar was a “sovereign decision” for each country to take.