UAE mulls 10pc euro reserves

[BIG WAVE]

The UAE is considering a plan to switch 10 per cent of its foreign currency reserves to euro from US dollar, though a decision is yet to be made, as the country plans to hedge its currency exposure, said Sultan bin Nasser Al Suwaidi, Governor, Central Bank of the UAE.

'But, this policy initiative has nothing to do with the current controversy over DP World's bid to P&O operations in the US,' he said.

Al Suwaidi, who was speaking to reporters after inaugurating a conference on 'Bond issuance-basis for building', at Central Bank of the UAE, said that the UAE dirham as well as the interest rates will continue to peg with greenback.

About the DP World deal, which has been blocked by US lawmakers last week, the governor said that some elements have unfortunately mixed up a pure business deal with politics, which is a matter of concern.

He was of the opinion that now investors would consider their investment plans, however, this development will not affect the relations between the two countries.

According to Reuters, Al Suwaidi said the DPW furore will colour foreign investor's perceptions of the US and affect future investment decisions. He said the row kicked up by US lawmakers over the ports deal betrayed a double standard.

'It is against the principles of international trade... which the US was instrumental in making. They will look at investment opportunities (in the US) through new binoculars,' he added.

Giving his views on the UAE's economic indicators, he said that the growth will continue for this year too, as there is no change in the sound economic fundamentals. The impact of high oil revenues, massive investments, development projects will all be reflected in the GDP's growth which is expected to expand this year, he said adding that it would not be less than 8 per cent.

Al Suwaidi said that rents and real estate triggered the inflation rate pushing it to alarmingly higher levels last year, but estimates for the current year are pretty encouraging as a substantial number of under construction housing units will improve the market situation that ultimately will arrest the inflation at around four per cent.
http://www.gulfinthemedia.com/index.php?id=195540&news_type=Economy&lang=en&

[Tyreds Tale]

Yeah, I saw this too.

I think there will be some momentum toward EU now, and away from the dollar. More reason to hold more in a dinar account or at least have some savings in another currency. I think most experts say 5 to 10% of long term savings should be hedged with a foreign currency.

[tattatu]

http://news.independent.co.uk/business/news/article351127.ece

...the governor of the Saudi Arabian central bank condemned the US move as "discrimination".

The governor of the UAE central bank, Sultan Nasser al-Suweidi, said the bank was looking to convert 10 per cent of its reserves, which stand at $23bn (£13.5bn), from dollars to euros. "They are contravening their own principles," he said. "Investors are going to take this into consideration [and] will look at investment opportunities through new binoculars."

OPEC central banks will act together, this has backing. They won't act at once (they have too many dollars), but they will diversify their reserves; so eventually their interest rates won't need to be pegged to the Fed's. Gold demand up 23% in Saudi Arabia.

[Gluphus]

hmm....

gonna be interesting to see how that mighty wall of Euros holds back the beduin hordes when the forceful resolve that the dollar buys them rolls back.

Qatar, Kuwait, UAE and those other county sized countries understand dollar reserves comes with the artillery, air support and armor that keeps them from becoming an extention of Iran or another King of the region. They don't keep all the prepo stocks and air bases there because they like the BK at AAFES....

In addition, lets see how it goes when the UAE wants to buy 5% of airbus...IMHO, the Gauls will make our response seem measured by comparision.

IMHO, watch for a small diversification, but status quo overall.
Either way, those of us holding dinars (and living in CONUS) win.

Now that I think about it, the port deal is funny: NO to those who have BILLIONS invested in the US, YES to the mafia....

[BIG WAVE]

The board of the United Arab Emirates’ central bank was to meet last night to consider shifting 10 per cent of the bank’s reserves from dollars to euros.
The UAE central bank foreign reserves, which stood at $ 23 billion in December, are held almost entirely in dollars.

The bank first announced in July that it was looking to shift some of those reserves into euros but said it at the time it would convert no more than 5 per cent.

Then Governor Sultan Nasser Al Suweidi said last month that the central bank had doubled that target – an announcement that helped lift the euro to a one-month high versus the yen and a one-week high against the dollar on March 13.

Al Suweidi said the board would take up the issue at meeting in April. A central bank official said decision would be announced today. A senior central bank source told Reuters the board would almost certainly ratify the shift, although the timing of the decision was not clear.

“It will almost definitely happen,” said the source, who declined to speculate on whether the decision would be taken at the meeting in the capital Abu Dhabi.

“That is up to the board. But the direction of policy is clear,” the source said.
The central bank controls only part of the foreign exchange reserves of the UAE, an oil-exporting federation of seven emirates. Other major holders include the investment arms of the emirates’ governments.

Markets have become particularly sensitive to any suggestion that Gulf Arab states could move away from dollar assets after a political storm in the United States forced UAE firm Dubai Ports World to relinquish control of major US ports last month.

But Suweidi said last month that any decision to switch to euros would be based on the relative yield of the European currency. The Bank for International Settlements (BIS) says investors from Opec have become increasingly sensitive to changes in the interest rate differential between the euro and the dollar.
http://www.gulfinthemedia.com/index.php?m=economics&id=200990&lang=en&PHPSESSID=a5570a3a886af662cdd95523cba987ff