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Dubai: The UAE has not set up any committee to review the dirham's peg with the weakening US dollar and there is no immediate plan to revalue the local currency, Central Bank Governor Sultan Bin Nasser Al Suwaidi has said.
"There is no intention at this time to revalue the dirham against the dollar," the Arabic daily Al Ittihad quoted him as saying in a report yesterday.
Al Suwaidi also quashed media reports that the UAE has set up a task force to look at possible revaluation of the dirham, which has been losing value in tandem with the dollar's decline against major currencies.
"Such a task force does not exist at all," he said, according to the newspaper.
Rising oil export incomes and high liquidity due to a monetary policy that tracks the US Federal Reserve interest cuts is stoking inflation in the UAE. The dirham's weakness is also contributing to imported inflation.
The UAE lowered its interest rate after the Fed on Tuesday slashed interest rates from 3 per cent to 2.25 per cent, the sixth US rate cut since September to bolster money supply amid a credit crunch. Economists say such rate cuts do not serve the economies of the UAE and other Gulf countries that have their currencies pegged to the dollar.
"Those rate cuts will likely fuel further acceleration in the growth rate of private sector credit, domestic liquidity and may ultimately push inflation rates further into the double-digit range," Hany Genena, director of economic research at Bahrain-based Gulf Finance House, told Gulf News.
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