Kuwaiti dinar peg to stay
Posted on » Friday, April 09, 2010
DUBAI: Kuwait's central bank will keep pegging its dinar to a currency basket for the foreseeable future, and prefers not to rush plans for a Gulf single currency, governor Shaikh Salem Abdul Aziz Al Sabah said yesterday.
Kuwait is the only GCC country tracking a currency basket after it broke ranks with fellow dollar-pegging oil producers in 2007 to keep surging inflation in check. It plans to form a currency union with Saudi Arabia, Qatar and Bahrain.
"The present exchange rate arrangement is serving the Kuwaiti economy well and there is no reason for, or net benefit of, changing it," Shaikh Salem said.
Shaikh Salem also said the basket peg provided relatively more room to manoeuvre in designing and conducting monetary policy and helped to insulate the Kuwaiti economy from external inflationary pressures linked to exchange rate fluctuations. He declined to reveal the composition of the basket, only saying it consisted of currencies of Kuwait's major trade and financial partners.
The central bank said in the past the dollar was the biggest component of the basket, while analysts have estimated the greenback's weight at around 75 per cent.
Late last year, the dollar's weakness fuelled a debate among Gulf countries on whether linking their future common currency to the greenback was the best option due to inflation fears.
Shaikh Salem did not say what currency regime would best fit the planned union, designed to emulate the euro zone, adding it was not possible to set a date for the single currency launch.
"While it is neither possible nor advisable at this stage to mention an exact date, we do look forward to increased efforts towards preparing the groundwork so that the single currency can materialise," he said. "It is vital that we do it right, rather than doing it quick," he added.
Kuwait's central bank surprised the markets in February, cutting its key interest rates by 25 to 50 basis points to support growth, expecting inflation to stay low.
Posted on » Friday, April 09, 2010
DUBAI: Kuwait's central bank will keep pegging its dinar to a currency basket for the foreseeable future, and prefers not to rush plans for a Gulf single currency, governor Shaikh Salem Abdul Aziz Al Sabah said yesterday.
Kuwait is the only GCC country tracking a currency basket after it broke ranks with fellow dollar-pegging oil producers in 2007 to keep surging inflation in check. It plans to form a currency union with Saudi Arabia, Qatar and Bahrain.
"The present exchange rate arrangement is serving the Kuwaiti economy well and there is no reason for, or net benefit of, changing it," Shaikh Salem said.
Shaikh Salem also said the basket peg provided relatively more room to manoeuvre in designing and conducting monetary policy and helped to insulate the Kuwaiti economy from external inflationary pressures linked to exchange rate fluctuations. He declined to reveal the composition of the basket, only saying it consisted of currencies of Kuwait's major trade and financial partners.
The central bank said in the past the dollar was the biggest component of the basket, while analysts have estimated the greenback's weight at around 75 per cent.
Late last year, the dollar's weakness fuelled a debate among Gulf countries on whether linking their future common currency to the greenback was the best option due to inflation fears.
Shaikh Salem did not say what currency regime would best fit the planned union, designed to emulate the euro zone, adding it was not possible to set a date for the single currency launch.
"While it is neither possible nor advisable at this stage to mention an exact date, we do look forward to increased efforts towards preparing the groundwork so that the single currency can materialise," he said. "It is vital that we do it right, rather than doing it quick," he added.
Kuwait's central bank surprised the markets in February, cutting its key interest rates by 25 to 50 basis points to support growth, expecting inflation to stay low.