GCC set to revalue its currencies
DUBAI: The currencies of the UAE, Bahrain, Oman and Saudi Arabia face the imminent prospects of getting revalued by up to 30 per cent in the wake of meeting of the governors of the GCC Central Bank scheduled for next month.
At their meeting in Saudi Arabia, the central bank governors are likely to review currency pegs to the US dollar and may agree to switch to another currency or a currency basket. According to Deutsche Bank AG, the UAE dirham and Bahrain dinar would be revalued by between 10 and 15 per cent while Saudi and Oman currencies could be revalued by 25 to 30 per cent. The bank did not rule out the revaluation of Kuwaiti dinar and Qatari riyal, but pointed out that they are estimated to be around fair value.
In its “GCC macro outlook” report, the bank said large current account surpluses in the GCC suggest currencies may have been overly competitive. However, the bank, noting that forex appreciation will not change the US dollar price of oil, said current account surpluses will be fairly unresponsive to any revaluation.
The International Monetary Fund recently said both currency revaluation and measures to stimulate economic growth in the GCC would be on its agenda.
Currency revaluation speculation is normally focused on the Chinese yuan but GCC currencies also increasingly under scrutiny these days as $250 billion US trade deficit with the Middle East oil producers are higher that the $200 billion trade deficit with China.
According to analysts, the immediate fallout of a dirham revaluation would be that euro-priced products will become cheaper, dampening consumer price inflation. “There would also be a one-off currency gain for the owners of local real estate. But on the other hand, the region would become more expensive for some tourists and the inflow of foreign money might falter as assets would be more expensive.”
The UAE Central Bank governor also hinted out on the possibility by saying “we (the governors) could come to the conclusion that we need to change.” courtesy khaleej times
http://www.dailytimes.com.pk/default...-2-2007_pg5_33
DUBAI: The currencies of the UAE, Bahrain, Oman and Saudi Arabia face the imminent prospects of getting revalued by up to 30 per cent in the wake of meeting of the governors of the GCC Central Bank scheduled for next month.
At their meeting in Saudi Arabia, the central bank governors are likely to review currency pegs to the US dollar and may agree to switch to another currency or a currency basket. According to Deutsche Bank AG, the UAE dirham and Bahrain dinar would be revalued by between 10 and 15 per cent while Saudi and Oman currencies could be revalued by 25 to 30 per cent. The bank did not rule out the revaluation of Kuwaiti dinar and Qatari riyal, but pointed out that they are estimated to be around fair value.
In its “GCC macro outlook” report, the bank said large current account surpluses in the GCC suggest currencies may have been overly competitive. However, the bank, noting that forex appreciation will not change the US dollar price of oil, said current account surpluses will be fairly unresponsive to any revaluation.
The International Monetary Fund recently said both currency revaluation and measures to stimulate economic growth in the GCC would be on its agenda.
Currency revaluation speculation is normally focused on the Chinese yuan but GCC currencies also increasingly under scrutiny these days as $250 billion US trade deficit with the Middle East oil producers are higher that the $200 billion trade deficit with China.
According to analysts, the immediate fallout of a dirham revaluation would be that euro-priced products will become cheaper, dampening consumer price inflation. “There would also be a one-off currency gain for the owners of local real estate. But on the other hand, the region would become more expensive for some tourists and the inflow of foreign money might falter as assets would be more expensive.”
The UAE Central Bank governor also hinted out on the possibility by saying “we (the governors) could come to the conclusion that we need to change.” courtesy khaleej times
http://www.dailytimes.com.pk/default...-2-2007_pg5_33