GRG55
10-06-07, 04:49 PM
Excepts and link to an article from ArabianBusiness' banking and finance news section.
Gulf investors might flee from US assets
by Gertrude Chavez-Dreyfuss (rob.corder@itp.com?subject=ArabianBusiness.com: Gulf investors might flee from US assets) on Friday, 05 October 2007
The broadly declining dollar could come under further pressure should Gulf Arab states decide to revalue their currencies and remove pegs to the greenback, prompting a flight out of U.S. assets by oil-rich Middle East countries.
Speculation about the dollar peg hogged the headlines in recent sessions after Saudi Arabia kept interest rates unchanged despite the Federal Reserve slashing benchmark rates by a half percentage point last month.
The Gulf states, most of which are members of the Organisation of Petroleum Exporting Countries, invest nearly 25 percent of their oil revenues, or so-called petrodollars, in dollar-denominated assets, according to a study by the Federal Reserve Bank of New York early this year.
The euro would be the biggest beneficiary should Gulf states shift reserves since the euro zone is one of the Arab region's biggest trading partners. Euro zone exports to all oil producing nations, including those in the Gulf, had climbed $77 billion to hit $167 billion from 2002-2006, the NY Fed study said.
Except for Kuwait, which in May dropped the dollar peg in favour of a basket of currencies to ward off imported inflation, the remaining five states of the six-nation Gulf Cooperation Council (GCC) have kept their currencies linked to the dollar.
By keeping the peg, the Gulf currencies have become undervalued against the dollar by about 20-25 percent, according to ING estimates.
"The OPEC states' defection from the dollar could potentially have far greater implications for global capital flows," said Jan Amrit Poser, head of research at Bank Sarasin in Zurich.
"With ($3.5 trillion), the currency reserves of the oil-producing nations are roughly three times the size of China's, and their current account surplus of $500 billion is more than twice as high," he added.
Still, some analysts are convinced the UAE will be the next country to revalue after Kuwait given high inflation and a diversified economy less reliant on crude.
Link to article:
http://www.arabianbusiness.com/501663-gulf-investors-might-flee-from-us-assets
Gulf investors might flee from US assets
by Gertrude Chavez-Dreyfuss (rob.corder@itp.com?subject=ArabianBusiness.com: Gulf investors might flee from US assets) on Friday, 05 October 2007
The broadly declining dollar could come under further pressure should Gulf Arab states decide to revalue their currencies and remove pegs to the greenback, prompting a flight out of U.S. assets by oil-rich Middle East countries.
Speculation about the dollar peg hogged the headlines in recent sessions after Saudi Arabia kept interest rates unchanged despite the Federal Reserve slashing benchmark rates by a half percentage point last month.
The Gulf states, most of which are members of the Organisation of Petroleum Exporting Countries, invest nearly 25 percent of their oil revenues, or so-called petrodollars, in dollar-denominated assets, according to a study by the Federal Reserve Bank of New York early this year.
The euro would be the biggest beneficiary should Gulf states shift reserves since the euro zone is one of the Arab region's biggest trading partners. Euro zone exports to all oil producing nations, including those in the Gulf, had climbed $77 billion to hit $167 billion from 2002-2006, the NY Fed study said.
Except for Kuwait, which in May dropped the dollar peg in favour of a basket of currencies to ward off imported inflation, the remaining five states of the six-nation Gulf Cooperation Council (GCC) have kept their currencies linked to the dollar.
By keeping the peg, the Gulf currencies have become undervalued against the dollar by about 20-25 percent, according to ING estimates.
"The OPEC states' defection from the dollar could potentially have far greater implications for global capital flows," said Jan Amrit Poser, head of research at Bank Sarasin in Zurich.
"With ($3.5 trillion), the currency reserves of the oil-producing nations are roughly three times the size of China's, and their current account surplus of $500 billion is more than twice as high," he added.
Still, some analysts are convinced the UAE will be the next country to revalue after Kuwait given high inflation and a diversified economy less reliant on crude.
Link to article:
http://www.arabianbusiness.com/501663-gulf-investors-might-flee-from-us-assets