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Dubai: The UAE revaluation of the dirham's peg with the dollar "can't be ruled out" as the state's central bank prepares to publish annual inflation data next month, the National Bank of Abu Dhabi said.
Revaluation would be "the most palatable of a number of options" open to the UAE central bank, which may say 2007 inflation rose to 10.9 per cent from 9.3 per cent in 2006, Giyas Gokkent, NBAD's head of research, said in a note to clients e-mailed yesterday.
While food prices rose by about eight per cent in 2007 on the weakening dollar, rental prices probably rose by 19 per cent compared with 15.4 per cent a year earlier, the NBAD note said.
Even though 61.8 per cent of inflation is attributable to rents, "regardless, a one-time revaluation would have a one-off anti-inflationary impact," Gokkent said.
Central banks in six Gulf Cooperation Council states, including Saudi Arabia and Qatar, are under pressure to revalue their currencies as the dollar declines, stoking inflation to record levels.
Kuwait was the first to drop its peg in May, choosing a basket of currencies instead. The dollar has dropped in five of the past six years, and fell to a three-week low against the euro February 23 on speculation the Federal Reserve will cut borrowing costs next month to avert US recession.
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