No de-pegging or revaluation, says Al Suwaidi

ABU DHABI — The Governor of the UAE Central Bank Sultan bin Nasser Al Suwaidi has said the UAE is not de-pegging its currency from the US dollar or even revaluing the dirham.

By Haseeb Haider

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Published: Tue 8 Apr 2008, 9:49 AM

Last updated: Sun 5 Apr 2015, 11:36 AM

Al Suwaidi reaffirmed that a dirham-dollar de-peg is out of the question and there is no intention for a currency revaluation, saying these measures were short-term solutions.

"The GCC is seeking to find long-term financial and monetary solutions," he maintained.

"Currency policy is not a game, rather it needs a lot of deliberation and in-depth consideration of all causes to produce a final conclusion," Al Suwaidi said.

Talking to reporters after inaugurating the plenary meeting of the MENA Financial Action Task Force, he said there is no intention for the time being to sever the dirham's relationship with the dollar.

"We are assessing the fluctuations in the currency exchange rates. It is impossible to take long-term monetary decisions on currency," he remarked.

Al Suwaidi said the impact of imported inflation was just 3.5 per cent out of total 10 per cent.

"The dirham's long standing peg to the dollar has nothing to do with inflation, however it has slight impact in the range of 3.5 per cent out of 10 per cent," Al Suwaidi said.

He said that during the 1992-2002, the greenback was on the rise and therefore so did the GCC currencies pegged to it. That trend reversed in 2004, when the dollar dropped. "We hope the US dollar would appreciate again," he said.

Al Suwaidi said that appreciation and depreciation of currencies are natural but domestic economic factors like spiralling prices of consumer goods due to high oil prices, impacting transport and storage charges had lead to increase in prices of commodities worldwide.

The construction boom taking place in the UAE and Qatar should also be factored in, he said. This breathtaking development would require more workers from around the world, who should of course be provided with accommodation. This in turn has pushed rents to jump to the current record highs in the two GCC countries, he added.

The Governor said rental inflation is out of the jurisdiction of the central bank.

As for GCC single currency, Al Suwaidi termed the initiative as a historic landmark. The GCC monetary union is a gradual process and it would be a great move forward, if it was achieved in one phase or two phases by 2010.



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