Wednesday, Aug 10, 2011

--UAE central back reaffirms currency peg to dollar

--Exchange rate policy to continue without change

--Local banks are in good position

(This story was originally published Tuesday.)

DUBAI (Zawya Dow Jones)--The United Arab Emirates central bank Tuesday re-affirmed its commitment to maintain its currency's peg to the U.S. dollar, despite a backdrop of rising global economic uncertainty that has caused the greenback to fall against other major currencies.

"On the issue of the exchange rate policy, the Board of Directors affirmed that the peg of the dirham to the U.S. dollar is continuing without change," the central bank said in an emailed statement.

The comments follow a statement by Bahrain's central bank governor earlier Tuesday that the tiny Gulf Arab state would keep its currency linked to the dollar, despite the U.S. currency's recent woes and a historic downgrade of U.S. debt by ratings firm Standard & Poor's last week.

The U.A.E., Bahrain and three of the other Gulf Cooperation Council states--Saudi Arabia, Qatar and Oman--peg their currencies to the dollar. The sixth GCC state, Kuwait, has pegged its dinar exchange rate to an undisclosed basket of currencies since 2007.

Saudi Arabia, Qatar and Oman have yet to comment on their dollar pegs since the S&P downgrade, though most economists think it highly unlikely that any GCC member will change their currency policy at a time of such global uncertainty.

The dollar has fallen sharply against other major currencies in recent weeks amid increased uncertainty over the outlook for the U.S. economy. Stock markets worldwide have tumbled since S&P's downgrade of U.S. government debt triggered investor concerns about the health of the world's biggest economy and the outlook for global growth. Share prices in the Gulf region closed down sharply Tuesday.

The U.A.E. central bank, in Tuesday's statement, said local "banks are in a good position and should not be negatively impacted by the recent turmoil in international markets."

-By Oliver Klaus, Dow Jones Newswires; +9714 446-1693; oliver.klaus@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

10-08-11 0353GMT