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Monday, August 8, 2011

GCC states to stick with US dollar

Abu Dhabi: The Gulf Cooperation Council (GCC) states, except for Kuwait, which keep their currencies pegged to the US dollar and are major buyers of US government debt will likely maintain the status quo for the foreseeable future despite a downgrade of the world's largest economy by credit ratings agency Standard & Poor's (S&P) on Friday.
Officials from the UAE and Oman spoke in support of the US dollar yesterday.
A senior UAE Central Bank official reaffirmed the country's stance on keeping the dirham's peg to the dollar intact.
"We are pegged to the dollar and will keep it. We don't see the dollar collapse. Because the problem is not in the US only, but also in the European markets," Mohammad Al Tamimi, deputy executive director at the UAE Central Bank's treasury department, told Reuters.
He said there was no alternative to investing in the US market which still remained "the most liquid and a safe market." Al Tamimi's comments followed a UAE Central Bank statement late in July that said: "No fear on the US dollar, although it is exposed to price fluctuations as it happens with all the major currencies."
"Despite the fact that the Central Bank foreign reserves are mostly denominated in US dollars, they are invested mostly in non-US assets," the statement added.
The S&P downgraded the US credit rating for the first time since 1941, lowering it one level to AA+ while keeping the outlook at ‘negative.'