UAE c.bank governor sees no pressure on dirham, forwards volatility limited

The governor of the United Arab Emirates central bank said on Sunday that he doesn’t believe there is any pressure on the Gulf Arab state’s currency and that any volatility seen in the forwards market has been limited.

Mubarak Rashid al-Mansouri also reiterated that the UAE would continue with the dirham’s peg of 3.6725 to the U.S. dollar.

The outlook for the country’s banking sector is improving after a difficult start to 2016, aided by an improvement in oil prices, which hit the $50 per barrel level for the first time in 2016 on May 26, Mansouri told reporters on the sidelines of an Arab finance ministers event in Abu Dhabi.

The dirham has weakened to a premium of around 60 points against the dollar in the one-year forwards market since last August from around zero previously, as low oil prices have created concern about the state finances and external positions of the Gulf oil exporters.

But the movement has been smaller in dirham forwards than it has been for some other Gulf currencies such as the Saudi Arabian riyal, becuase the UAE is believed to have stronger government finances and a more diversified economy. The dirham has rebounded from around 200 points hit in December and January.