Dollar faces new sell-off if Gulf states end greenback pegs

[UpInArms]

Source: Times Online

Foreign exchange markets are on alert this week for the embattled dollar to face a further, severe sell-off after key talks between the Middle East’s Gulf states that could lead to them scrapping their currencies’ pegs to the greenback.

Rulers of the six nations of the Gulf Cooperation Council (GCC) meet today and tomorrow in the Qatari capital of Doha amid significant pressures to sever their currency ties to the falling dollar, which is fuelling record inflation in their countries.

Officially, the GCC states have insisted that the key currency issue is not on the agenda for the rulers’ summit talks. However, there is intense speculation that mounting economic and social strains inflicted by the currency pegs could see them scrapped, or the Gulf currencies revalued, either at the meetings or within weeks of them.

Any move by five of the six GCC countries to follow a lead set by Kuwait in May and abandon their long-standing dollar pegs would add to already severe stress on the American currency, whose overall value on its broad trade-weighted index has plunged by nearly 12 per cent over the past two years, raising inflationary anxieties for the United States.

Read more: http://business.timesonline.co.uk/tol/business/economics/article2988001.ece

[zabet]

1. This should

make the stock market
pretty interesting tomorrow.

[roamer65]

2. They need to end the peg simply to control inflation.

Smart decision if they do end it. Following the Federal Reserve's 15+ percent M3 growth is following along on a pathway to disaster.

[JCMach1]

7. Exactly, UAE has heavy inflation because of heavy growth... plus we import

dollar deflation... This leads to what would be the equivalent of double-inflation (read almost hyper).

[Turbineguy]

3. Well, if the US economy

collapses before the next election Bush can say "Mission Accomplished" again.

But it's not happening yet:

^AORD All Ordinaries (Australia) 6,597 5:16am 3.60 (+0.05%)
^BSESN BSE 30 (India) 19,534.93 5:23am 171.74 (+0.89%)
^HSI Hang Seng (Hong Kong) 28,907.77 4:35am 264.16 (+0.92%)
^JKSE Jakarta Composite (Indonesia) 2,706.34 5:37am 18.01 (+0.67%)
^KLSE KLSE Composite (Malaysia) 1,414.19 4:30am 17.21 (+1.23%)
^NZ50 NZSE 50 (New Zealand) 4,060.01 4:01am -2.88 (-0.07%)
^N225 Nikkei 225 (Japan) 15,604.00 5:18am -76.67 (-0.49%)
^KS11 Seoul Composite (South Korea) 1,905.51 5:38am -0.49 (-0.03%)
000001.SS Shanghai Composite (China) 4,860.47 5:08am -11.31 (-0.23%)
^STI Strait Times (Singapore) 3,559.89 4:30am 38.62 (+1.10%)
^TWII Taiwan Weighted (Taiwan) 8,583.84 5:29am -2.56 (-0.03%)

[lovuian]

4. Economic WWIII has begun

its going to get ugly

[TrogL]

5. Yeah, I really think this qualifies as a fark moment

EVERYBODY PANIC!!!!

[JCMach1]

6. FOREX Here in UAE is already buying dollars at a hefty discount

Dubai: Arbitrary dirham rates offered by UAE money changers, in some cases as low as Dh3.05 per dollar or almost 17 per cent lower than the official rate, are sowing more confusion in the market where speculation on the dirham's revaluation is already rampant.

The UAE currency has been pegged at 3.6725 to the dollar since 1997 and until Sunday there was no change in the official peg.

UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi last month spoke about social and economic pressure to give up the dollar peg and to adopt a basket of currencies.

Saudi Arabia, the UAE and Bahrain have cut interest rates in the recent days to make it less attractive for investors to bet on the appreciation of their currencies. But that has not discouraged people from taking bets on the dirham's revaluation... http://gulfnews.com/business/Banking_and_Finance/10172028.html