Gulf to collectively act on dollar peg

Basel: The UAE will not drop its currency peg to the US dollar without other Gulf nations doing the same, the country's central bank governor said yesterday.

Six countries in the GCC are planning a single currency by 2010. However, this deadline is in doubt after Oman said it would not meet the target.

The GCC countries had agreed to keep their currencies pegged to the dollar in the run-up to 2010. But markets have been betting the dollar's decline would tempt some Gulf states to change dollar-pegged exchange rates, especially after Kuwait broke ranks and adopted a currency basket in May.

"Give me a certificate, I will sign it. For the UAE I can say comfortably and surely that we will not move alone and we will move with other GCC countries. We will all be together in it. No, we are not ruling out, but we will have to move together," Central Bank Governor Sultan Bin Nasser Al Suwaidi said.

"We meet regularly and we discuss these issues. These are monetary and exchange rate policies and if we decide that exchange rate policies need that we move to a basket... we will do that," he told reporters.

He added that the monetary union will come in three stages and the unified currency will come after the GCC sees the common market was working to the group's satisfaction, hinting that the 2010 GCC deadline for the single currency might be delayed.

"Our monetary union consists of three stages, but they don't need to be implemented at the same time. Stage one, two will be completed by 2010 and stage three will be a unified currency... we will defer it until we have a common market working to our satisfaction."

Suwaidi later said the GCC was between the first stage -- "getting capital flows right", and the second phase -- working towards a common market and adjusting policy.

He was speaking on the sidelines of a gathering of the world's central bankers at the Bank for International Settlements in Basel.

A Reuters poll in March tipped the UAE as the country most likely to revalue its currency after Kuwait to cope with the fallout from the dollar's fall.