Gulf economies to 'drop the dollar'

Nasser al-Shaali believes Gulf states will look at eastern markets 'aggressively' [Reuters]

Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan, the chief executive of Dubai International Financial Centre (DIFC) has said.

Nasser al-Shaali noted that the UAE central bank had already started buying euros - part of its strategy to move about 10 per cent of its reserves into the single European currency before the end of the year.

"We've seen, for example in the case of the UAE central bank, a movement into the euro," al-Shaali told the Reuters Middle East Investment Summit.

"In the future, most likely, we predict some of the economies in the region will adopt the Chinese yuan currency as well," he said, noting that he was not aware of that happening at the moment.


He said the appetite of the region as a whole was to increasingly diversify exposure.

"The investment strategies of Dubai Holdings entities, Kuwait Investment Authority and so on ... you will see a lot of these bodies start looking at Eastern Asia more aggressively along with a lot of institutional and private investors in the region," he said.

Deadlines

Saudi Arabia, the largest Gulf Arab economy, as well as Qatar, Oman and Bahrain have ruled out changes to their dollar pegs, adopted in preparation for a monetary union planned for 2010.

But the UAE and Kuwait, the third largest economy, have questioned the peg after the dollar fell about 10 per cent against the euro last year.

A Reuters poll of 15 analysts last week showed Gulf Arab states will probably not meet the deadline for currency union as member nations grapple with inflation and budget criteria, but Kuwait may revalue its currency before then.

Twelve of the 15 analysts, surveyed between March 16-20, said it was unlikely or very unlikely that the six members of the Gulf Corporation Council (GCC), representing the world's biggest oil exporting region, would meet its single currency target in three years.

U.S. launches show of force in Gulf

MSNBC.com

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Aircraft carriers, warplanes feature in maneuvers off the coast of Iran

The Associated Press

Updated: 6:17 a.m. MT March 27, 2007

DUBAI, United Arab Emirates - The U.S. Navy on Tuesday began its largest demonstration of force in the Persian Gulf since the 2003 invasion of Iraq, led by a pair of aircraft carriers and backed by warplanes flying simulated attack maneuvers off the coast of Iran.

The maneuvers bring together two strike groups of U.S. warships and more than 100 U.S. warplanes to conduct simulated air warfare in the crowded Gulf shipping lanes.

The U.S. exercises come just four days after Iran’s capture of 15 British sailors and marines who Iran said had strayed into Iranian waters near the Gulf. Britain and the U.S. Navy have insisted the British sailors were operating in Iraqi waters.

U.S. Navy Cmdr. Kevin Aandahl said the U.S. maneuvers were not organized in response to the capture of the British sailors — nor were they meant to threaten the Islamic Republic, whose navy operates in the same waters.

He declined to specify when the Navy planned the exercises.

Aandahl said the U.S. warships would stay out of Iranian territorial waters, which extend 12 miles off the Iranian coast.

Simultaneous French operations
A French naval strike group, led by the aircraft carrier Charles de Gaulle, was operating simultaneously just outside the Gulf. But the French ships were supporting the NATO forces in Afghanistan and not taking part in the U.S. maneuvers, officials said.

Overall, the exercises involve more than 10,000 U.S. personnel on warships and aircraft making simulated attacks on enemy shipping with aircraft and ships, hunting enemy submarines and finding mines.

“What it should be seen as by Iran or anyone else is that it’s for regional stability and security,” Aandahl said. “These ships are just another demonstration of that. If there’s a destabilizing effect, it’s Iran’s behavior.”

© 2007 The Associated Press. All rights reserved.

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