Financial experts from the Standard CharteredStandard Chartered expect a coordinated scrapping of the peg to the U.S. dollar from the monetary authorities of the Middle Eastern countries – Saudi Arabia, U.A.E., Qatar, Oman and Bahrain.
Kuwait, the only GCC country that tied its currency to euro and pound in addition to dollar (back in May 2007), now experience a better situation with the national inflation after the dinar appreciated by more than 6% against dollar in 2007.
Earlier the financial authorities of the U.A.E. stated that they are not going to drop the dollar peg alone, apart from other GCC states, and that it is a serious step that would require some precautions to be made.
Oil exporting countries are bound to the U.S. dollar as the vast majority of their reserve funds are denominated in this currency. A simultaneous abandonment of the decades old peg to the U.S. currency may rapidly devalue their foreign currency reserves adding more problems to their economies.
But according to the survey conducted by HSBC Holdings PLC, majority of the U.A.E. businessmen expect a diversification of the dirham’s peg in 2008 and about half of them would welcome such a change.
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