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Al Suwaidi reiterates UAE position on dirham peg to dollar
Central Bank Governor Sultain Al Suwaidi reiterated his confidence in the dollar for the second time in less than three weeks.
- By Ahmed A. Namatalla, Staff Reporter
- Published: 22:41 July 15, 2009
- Image Credit: AP
- US Treasury Secretary Timothy Geithner addressing the US and UAE Business Council meeting at the Emirates Palace in Abu Dhabi.
Abu Dhabi: Central Bank Governor Sultain Al Suwaidi reiterated his confidence in the dollar for the second time in less than three weeks.
In comments to Bloomberg after meeting US Treasury Secretary Timothy Geithner, Al Suwaidi said the UAE has no intention of depegging its currency from the dollar.
"It's very important to give realistic committal messages to the international markets," the governor told the news agency. "I would say [Geithner has] done that."
"We always emphasise that we will continue to peg the dirham to the US dollar," he added.
Geithner's highly-publicised stops in Jeddah and Abu Dhabi came on the heels of calls from China, Brazil and Russia at the end of June for the world to lessen its reliance on the dollar.
But while economists have increasingly urged Gulf Cooperation Council countries to move away from pegging their currencies to the dollar, the Gulf has remained patient.
Eckart Woertz, Gulf Research Centre Economics Programme Manager said the treasury secretary's visit is significant, but is overshadowed by the numbers.
"Geithner is an influential figure in US monetary policy and his visit was probably helpful to prop up confidence," Woertz said.
"But at the end of the day it is hard numbers that make or break the dollar's stability. As the Fed is now printing money to create liquidity and finance the US twin deficits, renewed dollar weakness is inevitable in the middle run."
Since February, the dollar has lost over nine per cent of its value against the euro.
Abu Dhabi (Bloomberg) Central Bank Governor Sultan Bin Nasser Al Suwaidi yesterday said the UAE may buy part of Dubai's $10 billion (Dh36 billion) bond offering after purchasing the first tranche in February.
"Maybe, if our board decides, we will buy part of them and, of course, start trading these bonds very soon," he said in a Bloomberg Television interview.
Al Suwaidi said that while the UAE's economy was improving, "we do believe that there will be contractions this year."
The UAE recently enacted a law that will enable the government to issue debt and sell it to the central bank, Al Suwaidi said.
"The central bank, of course, would trade in the secondary market with the banks and then it's a process which lets us provide liquidity to the banking system when it's necessary and take it when it's necessary through these instruments," he said.
Commenting on the exposure of UAE banks in two Saudi groups that are undergoing financial restructuring Al Suwaidi said banks will be required to disclose the amount of loans that they have made to two Saudi companies that are restructuring.
"There will be total disclosure," he said. "The market wants to learn about the exposure of UAE banks and that's what we will do."
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