Business | Economy
Senior bank official says dirham revaluation just round the corner
A senior Standard Chartered Bank official said on Thursday that revaluation of the UAE dirham may be just around the corner with the US Federal Reserve cutting benchmark interest rates yet again, putting more pressure on the local currency.
- By Himendra Mohan Kumar, Staff Reporter
- Published: 00:38 December 15, 2007
Abu Dhabi: A senior Standard Chartered Bank official said on Thursday that revaluation of the UAE dirham may be just around the corner with the US Federal Reserve cutting benchmark interest rates yet again, putting more pressure on the local currency.
In an interview, Jeremy Parrish, chief executive of Standard Chartered Bank for Abu Dhabi and Al Ain, told Gulf News: "If you look at the economic forces, it should happen pretty soon because through the dirham peg, interest rates in the dirham are likely to fall further. If there was no peg, interest rates would be considerably higher."
Nevertheless, UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi has insisted that the UAE will not abandon the peg policy in "the foreseeable future."
On the Fed rate cut, Parrish said, "The shape of the US economy is different from that of the UAE. Growth is slowing in the US, particularly in the real estate sector, but the UAE economy is growing at a fast clip.
"Clear progress can now be seen in real estate and mega infrastructure projects in Abu Dhabi like Yas Island, Al Raha Beach and Saadiyat island," he said.
"The peg illustrates the dilemma whereby we know inflation is at a much higher rate here... dirham interest rates would create further pressure on inflation as negative interest rates widen," he added.
"There's plenty of dirham liquidity. The primary reason foreign money is coming here is in the expectation that the peg will shift," said Parrish.
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