UAE rejects Greenspan s advice to de-peg from dollar

DUBAI (Thomson Financial) - The United Arab Emirates will not de-peg its currency from the flagging US dollar, the central bank governor was quoted as saying in remarks published today.
His comments came after former US Federal Reserve chairman Alan Greenspan advised oil-rich Gulf Arab states whose currencies are pegged to the dollar to float their currencies as a means to curb inflation.
"The dollar is on its way to strengthening, and it is not logical to speak now of de-pegging the dirham from the dollar," Sultan bin Nasser al-Suwaidi told the Abu Dhabi-based daily Al-Ittihad.
The peg "greatly benefited the local economy, and helped achieve good rates of growth in the industrial and tourism sectors as well as attract foreign investments," he said.
Suwaidi said the dollar peg had also helped member states of the oil-rich Gulf Cooperation Council prepare for monetary union planned for 2010.
Suwaidi said Greenspan, who made his remarks during a conference in Abu Dhabi on Monday, was merely "putting forward various scenarios to ease the pressure on Gulf economies, which are suffering from high levels of inflation due to several external and internal factors, and not just their currencies link to the dollar."
Greenspan said he believed "floating is better than fixing or revaluation" of the exchange rate against the ailing dollar.
Gulf Arab states, which are US allies, are experiencing high growth rates of between four and eight percent because of rising oil revenues.
But inflation has also risen to double digits in some states, with official figures for UAE at 9.3 percent for 2006.
Since May 2007, when Kuwait dropped its dollar peg and adopted a basket of currencies, there has been constant speculation that the UAE and Qatar would follow suit or revalue their currencies.
But leaders of the GCC -- grouping Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE -- decided at their annual summit in December that their currencies, except for the Kuwait dinar, would remain pegged to the greenback. newsdesk@thomson.com AFP/ajb/rw COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News. MMMM