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Kuwait lets dinar rise to record against dollar
Kuwait let the dinar rise to its highest level against the dollar in at least 26 years yesterday as continued weakness in the US currency highlights the shortcomings of dollar pegs in other Gulf oil producers.
- Reuters
- Published: 01:00 April 11, 2008
Kuwait City: Kuwait let the dinar rise to its highest level against the dollar in at least 26 years yesterday as continued weakness in the US currency highlights the shortcomings of dollar pegs in other Gulf oil producers.
The dinar, the currency of the world's seventh-largest oil exporter, rose 0.41 per cent to a mid-point of 0.26510 per US dollar, the Kuwaiti central bank said yesterday. That brought its cumulative gain since dropping its peg to the dollar last May to 9.07 per cent.
The dollar fell broadly yesterday as the market focused on interest rate differences. A rise in oil prices to a record high on Wednesday and falling stock prices also weighed on the dollar.
Kuwait's neighbours in the world's biggest oil exporting region have repeatedly said they will not follow suit in dropping their pegs to the dollar.
"It gives Kuwait more flexibility and to a certain extent helps to combat inflation if the US dollar falls sharply, but infla-tion figures are still going up," said Hany Genena, director of economic research at investment bank Gulf Finance House in Bahrain.
Annual consumer inflation in Kuwait accelerated to a record 7.54 per cent in December.
Investors have dumped the dollar on doubts about the United States Federal Reserve's ability to contain the deepening credit market turmoil, which has hobbled its efforts to help the economy by slashing rates and raised the threat of a protracted US economic recession.
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