UAE central bank chief says to keep currency peg to dollar

The UAE dirham edged down to its lowest level against the dollar in over a year

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The United Arab Emirates will keep its currency peg to the U.S. dollar and media reports that the currency regime is under study are not true, the central bank governor was quoted as saying by state news agency WAM.

The UAE dirham, which has been fixed at a rate of 3.6725 to $1 since 1997, edged down to its lowest level against the dollar in over a year in the one-year forwards market last week as the price of oil, on which the economy depends heavily, fell to new four-year lows.

An economic committee of the Federal National Council, an advisory body to the UAE government, has suggested the central bank review the peg, a committee member told Reuters on Thursday, although he stressed that the recommendation was not related to the oil price slide.

But central bank chief Mubarak al-Mansouri said in a statement sent to WAM late on Saturday that “fixing and safeguarding the official exchange rate of the dirham falls by law within the purview of the Central Bank’s Board of Directors.”

“The policy of the fixed peg of the dirham against the U.S. dollar will remain in place,” he said.

Mansouri also said economic indicators of the UAE, one of the world’s top oil exporters, strongly supported the continuation of the fixed peg regime.

“This exchange rate policy has contributed to maintaining economic stability and bolstering investors’ confidence over the long period it has been in effect,” he said.

The peg came under pressure in 2008 as the global financial crisis slashed oil prices and disrupted fund flows. Private economists believe the UAE economy is much better placed to withstand the current oil price volatility, having built up large fiscal reserves and strengthened its non-oil sector.

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