The decline in the US dollar is causing concern to the Gulf states whose currencies are pegged to the US unit, prompting calls for revaluation of the currency.
Saudi Arabia, the UAE, Qatar, Oman and Bahrain peg their currencies to the dollar, while Kuwait uses a basket of currency. Rising inflation is a major cause for the Gulf economies since a majority of the workforce are foreign workers whose incomes are falling as a result of that.
Incidentally all the Gulf states are under pressure to revalue their currencies since inflation is rising high.
Except Kuwait, all Gulf states like Saudi Arabia, the UAE, Oman, Qatar, Bahrain have pegged their currencies to the US dollar.
Analysts said yesterday that the refusal of as many as four GCC states that have pegged currencies to follow the US rate cut is an indication that a revaluation could be in the offing. Only UAE and Kuwait cut ates following a 50 basis points rate cut by the US Fed on September 18.
Saudi Arabia, a close US ally and the world’s leading oil producer, has reaffirmed its determination to continue its dollar peg policy at the time when Kuwait disentangled from the dollar peg. Saudi riyal registered last week its strongest position against the dollar over the past 21 years.