Funk at the GCC Currency Meet

[ordinaryseawoman]

Published: 05/04/2007 12:00 AM (UAE)
Currencies weaken as GCC keeps dollar peg


Reuters

London: Gulf currencies weakened yesterday with the Saudi riyal at a two-month low a versus the dollar as regional central banks reiterated their commitment to existing currency pegs, sending speculative flows into reverse.
A meeting of central bank governors in Saudi Arabia ended on Tuesday with their agreeing to maintain currency policy in the face of market pressure to loosen pegs to the falling dollar.
The executive president of Oman's central bank said the agreement to keep the peg system was informal and had not been formally discussed during the meeting.
"Informally the governors agreed that everything will stay as it is," Hamood Sangour Al Zadjali told Reuters.
Speculation about a currency revaluation had gathered pace before the meeting but banks have moved to quash these bets, with Kuwait and the UAE cutting interest rates in recent days. Kuwait also cut the coupon on its benchmark bonds, making the assets less attractive to speculators.
"The currencies are weakening because all the speculative flows were positioned for a revaluation, then over the past week we have had several signals that the Gulf currencies will not revalue," said Koceila Maames, economist at Calyon in Paris.
http://archive.gulfnews.com/articles/07/04/05/10115992.html

[ordinaryseawoman]

3750

Unable to hide a mood of dissatisfaction


Gloom at currency talks points to deep GCC rift

Six Arab Gulf central bankers deeply divided as they met to hammer out details of monetary union plan.

MEDINA, Saudi Arabia - The tense, gloomy atmosphere at Gulf currency talks in Saudi Arabia indicated just how deeply divided the six central bankers were as they met to hammer out details of a monetary union plan.
Tuesday’s official statement attempted to put up a united front for currency markets tearing at dollar-pegged exchanges rates on the expectation that a 2010 deadline for monetary union would slip.
The body language of the governors, and the mood at the meeting told a different story.
The governors abruptly ended their talks a day early on Tuesday and crammed a scheduled third day of sightseeing in Medina, Islam’s second holiest city, into an evening tour.
The central bankers rarely talked to each other in public during the tour.
They said even less to journalists, who were repeatedly reminded by summit organisers to “stick to protocol”, a stark contrast to the more informal atmosphere of previous gatherings of regional central bankers and finance ministers.
The usually gregarious Sultan Nasser al-Suweidi, governor of the United Arab Emirates central bank, declined comment on everything, even on why he had cut and then raised interest rates on the Monday and Tuesday.
By contrast his head of treasury, who rarely talks to the media, chatted freely with reporters on the subject in Abu Dhabi, the UAE capital, yesterday.
It was al-Suweidi who ratcheted up market expectations for the Medina meeting by casting doubt in an interview in January on whether the six oil producers would stand by an exchange rate regime set up to prepare for a single currency.
At the time he ruled out a unilateral revaluation of the dirham and said any review would be agreed by the six governors.
The governors did agree to leave their exchange rate regime unchanged, Saudi Arabian Monetary Agency Governor Hamad Saud al-Sayyari told reporters after the meeting, although his patience wore thin when he was asked to be more precise.
“Don’t you listen?” al-Sayyari snapped at one reporter. “What do you want? I’ve already said that we are sticking to the same foreign exchange system.”
The governors were under intense pressure to clinch a deal on European Union-style convergence criteria to inject momentum into the monetary union project.
On the one hand, speculators had forced Kuwait and the UAE, the top candidates for a revaluation according to a poll last month, to cut interest rates to ease pressure on exchange rates.
On the other hand, the rulers of the six countries had agreed to give the central bankers power to negotiate a binding agreement.
“They feel a great deal of pressure on the convergence criteria. It’s not easy for them to make decisions,” an official of the Gulf Co-operation Council Secretariat, the executive of a regional economic and political bloc, said on condition of anonymity.
In the end no deal was reached. Al-Sayyari said the 2010 deadline would not be met without an extraordinary effort from Saudi Arabia, Kuwait, Bahrain, Qatar, and the UAE.
Oman had pulled out last year, saying it did not think the deadline was achievable.
Even the agreement to leave exchange rates unchanged was purely an informal one, Hamood Sangour al-Zadjali, executive president of Oman’s central bank, said.
The governors had spent three hours behind closed doors without their aides. “The talks were transparent and frank,” a GCC Secretariat official said, avoiding a question on whether the meeting had been tense. “Each delegate delivered his ideas in a very open manner.”

http://www.middle-east-online.com/english/business/?id=20274

[Okie]

I believe this is good news! If they had changed and pegged to the EURO it would have been very bad for the USD.

[Howler]

I believe this is good news! If they had changed and pegged to the EURO it would have been very bad for the USD.

I agree!!!!! If they moved away from the dollar it would kill us!
And I never thought they could move to a single currency anyway. They just dont like each other that much!:lmao:

[Shau - Kenshin]

Alright but this does nothing for our Reval. Does it? (Actually asking!)

[Blacize]

Wait a tick!!

There's been a lot of talk lately about the GCC reval. Could Iraq possibly be connected with this and reval at the same time? Or are they not part of the GCC yet? Wasn't there talk about IQD being absorbed into a single, unified GCC currency? Even if they're not part of the GCC, wouldn't it make sense to revalue at the same time that the others do? I know that some will say "NO, NOW!!" but it would be a sign of Middle Eastern Unity in preparation for their single currency. Maybe I'm looking at this wrong and if so, wouldn't b*tch about a different point of view. Help me out here someone

[Secret Key]

Smoke and mirrors.

Heads up...GCC reval coming.

[Garf]

Alright but this does nothing for our Reval. Does it? (Actually asking!)

Nope !

I get the impression the Saudis are a bit glum over their pegging to a slipping USD, in turn bringing their own currency down in value. Now why they don't go ahead and peg to a basket, or the Euro for example anyway... or simply revalue their currency to cover losses.... who knows ??

It would probably be the death knell to a GCC common currency if they did proceed, however that's looking shaky anyway.

Having said that, the complete opposite could be reported soon... such is the way they do things over there :)

[MeMe]

"A unified GCC currency", are you kidding? Why do you think they can get together and agree on the currency when they can't agree on anything else? They talk, talk, talk..... We want them to act, act, act.....

[MrAustin]

I agree!!!!! If they moved away from the dollar it would kill us!
And I never thought they could move to a single currency anyway. They just dont like each other that much!:lmao:

which in turn would effect the whole world markets, we are the largest buyer of b.s. on the planet. My wonder is, does saudi know our plans with iraq? They are very assertive not to take the peg off the dollar, has to be a reason why. say hypothetically most countries switch to petro euros, saudi holds on the petro dollars, iraq revals and peg to dollar saudis will make much more money and it will revive the USD to its former era of greatness (of course few other things must happen) .. Where as the countires who went to euro would be out. I dunno :wave:

also is it just me or are countries all around the world trying to make a continental currency? Ive read parts of Africa trying to, gcc, the amero, and of course the euro.

[mik]

I say (opinion I'm no advisor) buy up the currancy of the Country who has the lesser amount in the GCC against the Dollar. In other words all those Countries are pegged but at differnt rates find the cheapest one and start buying it up little buy little. Then when they go to one currency it will be valued @ a higher rate. I guess you would have to exchange it though durring the time frame. The gloom doom news is to keep speculators away. 2010 no,yes, no, maybe. It maybe or maybe not 2010 but I think its comin. I wouldn't count on Iraq just yet not because they won't succeed but because we don't know how these countries will treat a fully Demictratic /Free Enterprise Middle Eastern Country. They may let'em in they may come up w/ excuses though not too.

As far as my opinion on them not switching to the Euro peg or going to I am sure the U.S. won't let that happen our currancy would fall worldwide and others would follow. The U.S. can't let that happen.