A United Arab Emirates daily today commented on the alarming depreciation of the U.S. dollar against major currencies and its impact on the dollar-pegged dirham.
The Dubai-based English language 'Gulf News' said that the Central Bank has taken a bold step by lowering interest rates in order to discourage market speculation about dirham re-valuation.
"The UAE Central Bank finds itself in a dollar dilemma. At a time when the dirham's peg to the declining US currency is contributing to the rising cost of living at home, interest rates should be higher," the paper said.
"But the Central Bank has decided to lower the interest rates in an attempt to discourage market speculation that the UAE would revalue the dirham because of the dollar's falling value," it added.
"Central Bank Governor Sultan Nasser Al Suwaidi has spoken about social and economic pressure to drop the dollar peg to tame inflation. In its latest report on the UAE, ratings agency Moody's said if inflation goes unchecked it would erode the competitiveness of the country's growing non-hydrocarbon sector." The paper noted that the Central Bank wanted to tell the market that it will not sit quietly while speculators take bets on the currency's revaluation.
"The UAE currency has been fixed at 3.6725 per dollar since 1997. Investors are speculating a 3.1 per cent appreciation in one year. The dollar's decline has been a focus of concern for many countries and steps to arrest the impact of the falling greenback are varied. It will be interesting to see how this dilemma is resolved." Source
The Dubai-based English language 'Gulf News' said that the Central Bank has taken a bold step by lowering interest rates in order to discourage market speculation about dirham re-valuation.
"The UAE Central Bank finds itself in a dollar dilemma. At a time when the dirham's peg to the declining US currency is contributing to the rising cost of living at home, interest rates should be higher," the paper said.
"But the Central Bank has decided to lower the interest rates in an attempt to discourage market speculation that the UAE would revalue the dirham because of the dollar's falling value," it added.
"Central Bank Governor Sultan Nasser Al Suwaidi has spoken about social and economic pressure to drop the dollar peg to tame inflation. In its latest report on the UAE, ratings agency Moody's said if inflation goes unchecked it would erode the competitiveness of the country's growing non-hydrocarbon sector." The paper noted that the Central Bank wanted to tell the market that it will not sit quietly while speculators take bets on the currency's revaluation.
"The UAE currency has been fixed at 3.6725 per dollar since 1997. Investors are speculating a 3.1 per cent appreciation in one year. The dollar's decline has been a focus of concern for many countries and steps to arrest the impact of the falling greenback are varied. It will be interesting to see how this dilemma is resolved." Source
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