7/12/2008

Dropping the peg

An Abu Dhabi policy report makes the case for being rid of the Gulf peg to the dollar

The official position of the Gulf Co-operation Council (GCC) that the fixed peg to the US dollar will remain in place until monetary union is achieved has never looked entirely convincing. It has suffered a further blow to its credibility with publication of a report by a department of the Abu Dhabi government suggesting that the time has come for a serious rethink of GCC monetary policy, including revaluation and a shift to a basket of international currencies as an exchange-rate reference point.

The report, issued by Abu Dhabi's Department of Planning and Economy (DPE), marks the first time that any government body in the GCC has openly advocated ditching the peg since Kuwait went its own way in early 2007 by tying the Kuwaiti dinar to a currency basket. It is unlikely to presage an immediate change in policy, but it suggests that the option of revaluation during the transition to monetary union could be given serious consideration when GCC finance ministers meet in September, ahead of this year's summit in November. ...



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[Source: Breaking News from WarOnYou.com - Posted by Mint Dollar- The Federal Reserves Worst NightMare]

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