Dollar peg under review

Dubai: The UAE and Qatar will review the dollar peg that has brought down their respective currencies and added to inflationary pressures.

"The UAE Central Bank is setting up a committee to help coordinate the possible de-pegging of the country's currency from the US dollar," a news report said yesterday, quoting unnamed sources.

That group is currently being assembled, all its members are from the Central Bank, and it will report by the end of the year, the report said.

Qatari Prime Minister Shaikh Hamad Bin Jasem Bin Jabr Al Thani told a conference that his country is considering dropping its dollar peg.

Economists say the steep decline in the US dollar and interest rate cuts have prompted the move, and that this latest step could amount to a genuine policy shift.

"The Gulf governments and central banks are all aware that the US currency and interest rates are heading in the wrong direction. In that kind of an environment it's natural that they should examine the advantages of currency reform," Simon Williams, chief economist with HSBC, told Gulf News on Monday.

"It's a strong indication that they are seriously looking at the issue. I believe it's a real move," said Monica Malik, Director of Economics at EFG Hermes.

- With inputs from agencies

Shortage: Central bank steps in

The UAE Central Bank yesterday started lending dollars to banks against their certificates of deposit (CDs) after speculation the Gulf state would revalue its dollar-pegged dirham led to a shortage in the US currency.

Banks can borrow dollars up to $200 million a day at 3.25 per cent for one-week CDs, 3.15 per cent for one-month CDs and 3.05 per cent for three-month CDs.