The UAE will maintain the dirham’s peg to the dollar and has no plans to rejoin the planned Gulf monetary union “for the time being,” Sheikh Mohammed Bin Rashid Al Maktoum told Cable News Network June 25, 2010.

The emirates “still believe” in the peg, Sheikh Mohammed said in an e-mailed transcript of the CNN interview on Friday sent by the Dubai ruler’s media office. “The euro is in trouble and we thought of the Gulf currency and we said, well the UAE said ‘not yet’ and I think they are right, until we are sure.”
Last year the UAE pulled out of a planned monetary union with four other Gulf states that aims to allow the region more control over monetary policy, now tied to the US. The UAE central bank faces no currency risk from fluctuations in the euro as almost all its portfolio is in dollars, Saif al-Shamsi, senior executive director for the central bank’s treasury department, said June 8. The euro has been the worst performer this year among 10 developed-nation currencies, falling 9.3 percent, according to the Bloomberg Correlation-Weighted Currency Indices.

Dubai’s economy will shrink about 0.5 percent this year, the International Monetary Fund said last month, after real estate prices plummeted from their peak in 2008. The second- largest of the seven emirates making up the UAE, Dubai had to seek a $20 billion bailout from Abu Dhabi last year, after borrowing $109bn according to IMF estimates.


Related Posts: