Kuwait lets dinar rise by highest since July

Dubai: Kuwait let its dinar rise against the dollar by the biggest margin in almost eight months yesterday, taking its cumulative gain above seven per cent for the first time since dropping its peg in May to the falling US currency.

The dinar, the currency of the only Gulf state to drop its peg, will trade 0.78 per cent higher around a mid-point of 0.26910 against the dollar, compared with 0.27120 on Wednesday, the central bank said.

That is the biggest jump since July 25 when the central bank allowed the dinar to rise 1.74 per cent, and brings its cumulative gain to 7.45 per cent.

The dollar hit a record low against the euro and a 12-year low against the yen yesterday, and shares fell as euphoria subsided about the latest helping-hand from the US Federal Reserve and reality - $110 oil and recession fears - returned.

"The large move maintains the real value of the dinar and underscores the advantages of Kuwait's more flexible currency regime," said Simon Williams, Middle East economist at HSBC Holdings in Dubai.

"Fixed pegs don't bring currency stability, they leave a currency fully exposed to the volatility of the dollar," Williams said.

In Germany, Qatar's central bank governor said the oil and gas producer will keep its riyal pegged to the dollar at the same rate for now as it grapples with near-record inflation and expectations of imminent currency reform.

The Qatar riyal hit its highest in more than three months on Wednesday after Zawya Dow Jones reported the Gulf state may revalue its currency or drop its dollar peg next month, citing an unidentified Qatari central bank official.