Call for dirham revaluation, depegging
Speakers and participants at a seminar on "dirham's depreciation and the dollar-peg" on Tuesday were divided on the question of continuing the link with the greenback and the possibility of an imminent revaluation of the UAE currency.
The seminar was organised by the Banking and Finance Sub-Group of the Dubai Quality Group (DQG), a non-profit organisation dedicated to raising the general performance level of the local business environment.
Amid strong calls for an immediate delinking of the dirham from the plummeting dollar, some speakers also called for a revaluation of the UAE currency by up to 20 per cent to restore its intrinsic value.
"The dirham has lost against most currencies over the past few years thanks to its alignment with the sliding dollar. So it is time, the UAE and other GCC countries ditch the dollar peg and opt for a basket of currencies," one speaker pointed out.
However, others cautioned that a sudden switch would destabilise the UAE currency and derail the GCC currency union goal. It would be ideal to wait for some time to see a turnaround in the fortunes of the dollar until the GCC currency union is achieved, some participants said.
The panel of speakers at the seminar included Mary Nicola, Economist, Standard Chartered Bank; Devanand Mahadeva, HR Specialist, Continental Financial Services, Dubai, Dr. Massimiliano Castelli, Director at UBS and Senior Economist, Jason Goff, Head of Treasury Sales, FX & Structured Products at Emirates Bank and Professor Brett King, Vice President of American Academy of Financial Management, who acted as the panel moderator.
Some of the participants argued that even without de-pegging from dollar, the UAE monetary authorities should consider a revaluation. Moving away from the dollar-peg, which has been a strong stability factor for the dirham for several decades, to a basket of currencies would not help the country's economy in the current scenario, they opined.
Discussions covered the future of the US dollar; its impact on the regional currencies, particularly the dirham; its effect on the inflation rate; and the feasibility of sticking to the US dollar.
Also, the forum attempted to assess the future of the GCC currencies, including the economic advantages and disadvantages of revaluating or moving to a basket of currencies, and offered the latest updates and best practices that will allow more flexibility.
"The depreciation of the US dollar has become a sensational issue in the regional financial sector, as it is creating significant pressure on the UAE and other GCC countries whose currencies are pegged to the greenback.
DQG's Banking and Finance Sub-Group gathered renowned financial experts and professionals for this exclusive seminar to provide organisations a clear perspective of the situation and offer debates and brain storming sessions on how to react proactively," said Osama Al Rahma, Chairman-Banking and Finance Sub-Group, Board Member-DQG and General Manager-Al Fardan Exchange. Certain quarters have expressed concerns on the risks involved in maintaining dollar-pegged currencies in GCC, especially after Kuwait recently decided to revalue its currency to stave off rising inflation, which the country claimed was mainly caused by the weakening greenback. Source
The seminar was organised by the Banking and Finance Sub-Group of the Dubai Quality Group (DQG), a non-profit organisation dedicated to raising the general performance level of the local business environment.
Amid strong calls for an immediate delinking of the dirham from the plummeting dollar, some speakers also called for a revaluation of the UAE currency by up to 20 per cent to restore its intrinsic value.
"The dirham has lost against most currencies over the past few years thanks to its alignment with the sliding dollar. So it is time, the UAE and other GCC countries ditch the dollar peg and opt for a basket of currencies," one speaker pointed out.
However, others cautioned that a sudden switch would destabilise the UAE currency and derail the GCC currency union goal. It would be ideal to wait for some time to see a turnaround in the fortunes of the dollar until the GCC currency union is achieved, some participants said.
The panel of speakers at the seminar included Mary Nicola, Economist, Standard Chartered Bank; Devanand Mahadeva, HR Specialist, Continental Financial Services, Dubai, Dr. Massimiliano Castelli, Director at UBS and Senior Economist, Jason Goff, Head of Treasury Sales, FX & Structured Products at Emirates Bank and Professor Brett King, Vice President of American Academy of Financial Management, who acted as the panel moderator.
Some of the participants argued that even without de-pegging from dollar, the UAE monetary authorities should consider a revaluation. Moving away from the dollar-peg, which has been a strong stability factor for the dirham for several decades, to a basket of currencies would not help the country's economy in the current scenario, they opined.
Discussions covered the future of the US dollar; its impact on the regional currencies, particularly the dirham; its effect on the inflation rate; and the feasibility of sticking to the US dollar.
Also, the forum attempted to assess the future of the GCC currencies, including the economic advantages and disadvantages of revaluating or moving to a basket of currencies, and offered the latest updates and best practices that will allow more flexibility.
"The depreciation of the US dollar has become a sensational issue in the regional financial sector, as it is creating significant pressure on the UAE and other GCC countries whose currencies are pegged to the greenback.
DQG's Banking and Finance Sub-Group gathered renowned financial experts and professionals for this exclusive seminar to provide organisations a clear perspective of the situation and offer debates and brain storming sessions on how to react proactively," said Osama Al Rahma, Chairman-Banking and Finance Sub-Group, Board Member-DQG and General Manager-Al Fardan Exchange. Certain quarters have expressed concerns on the risks involved in maintaining dollar-pegged currencies in GCC, especially after Kuwait recently decided to revalue its currency to stave off rising inflation, which the country claimed was mainly caused by the weakening greenback. Source
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