No need for revaluation - Al Suwaidi

Frankfurt: The UAE central bank said yesterday it would leave its dollar peg unchanged for the "foreseeable future" after Gulf rulers agreed to keep any currency reform talks secret to calm markets.

UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi, who complained last month he was under growing pressure to drop the peg and track a currency basket, said yesterday there was no need to allow the dirham to rise against the tumbling dollar.

"No change is going to take place in the near future, in the foreseeable future," Suwaidi told Reuters on the sidelines of a conference in Frankfurt.

Asked if the dirham's exchange rate was going to stay the same, Suwaidi said: "Yes, yes. No change. It's better to stay as they are."

The remarks were Suwaidi's first since a Gulf Arab summit overshadowed by disagreement on currency reform between Saudi Arabia and the UAE, the two largest of six economies preparing for monetary union as early as 2010.

Bahrain's foreign minister said on Tuesday the six states planned to meet to discuss revaluations. Qatar's Prime Minister said the rulers would not confirm whether they had discussed currencies at the summit to avoid "scaring markets".

The six Gulf Cooperation Council (GCC) states made no reference to dollar weakness or currency policy in their summit declaration, but Qatar's prime minister and other policymakers said they were committed to dollar pegs.

Belief

"I think the GCC also believes in the US dollar peg. Everyone is pegging to the US dollar," Al Suwaidi said. "We are all committed to the dollar peg."

Al Suwaidi had nourished market expectations that the UAE and some of its neighbours would change currency policy when he said in a Tokyo speech last month the dollar's decline had taken his country to a "crossroads" on dirham policy.

In a subsequent interview, Al Suwaidi said he was under pressure from "communities and companies" to drop the peg and track a currency basket.

He said the UAE would act in concert with its neighbours, unlike Kuwait, which switched unilaterally to a currency basket in May.

Saudi Arabia dismissed any suggestion of an end to its dollar peg at the summit which ended in Qatar on Tuesday.