Dirham-dollar swap brings down rates

Abu Dhabi: Inter-bank interest rates have dropped considerably since the Central Bank launched the swap facilities (US dollar/UAE dirham) last month, the UAE Central Bank has announced.

In a statement issued yesterday, the Central Bank said although the drop was more obvious in short-term interest rates (one month), long-term (2 to 12 months) interest rates also saw some decline.

The statement said that the one-month interest rate dropped from 4.71 per cent at the end of October to 4.4 per cent by the end of December and fell further to 3.8250 per cent on January 7.

The Central Bank said it had until now provided banks operating in the UAE with Dh3.7 billion (about $1 billion) through the swap with US dollar.

The statement stressed that the Central Bank would like to encourage banks to use the various facilities it provided to support liquidity through the dirham-dollar swap and the discount facilities.

It highlighted that the extensive use of these facilities would push inter-bank interest rates further down, which would help the UAE economy achieve the required level of performance.