UAE says watching Fed to decide dollar strategy Sunday, September 10, 2006
The United Arab Emirates central bank will watch the outcome of the US Federal Reserve’s monetary policy moves before deciding strategy on the US dollar, governor Sultan Nasser al-Suweidi said yesterday.
The Gulf oil exporter’s central bank has decided to convert 10% of its largely dollar-denominated foreign exchange reserves into euros and gold, but Suweidi said the switch had not yet been carried out.
He said no decision had been made yet on gold purchases.
Asked about the outlook for the US dollar and the euro in light of an anticipated pause in the Federal Reserve’s interest rate rises, Suweidi said: “We are waiting to see the outcome of that decision. There’s a shift in the strategy of the Fed. That will entail a new strategy on our side.”
But the UAE was still committed to converting part of its reserves, which stood at $23bn in December, into euros, Suweidi said on the sidelines of a Gulf central bank governors’ meeting in Abu Dhabi, capital of the UAE.
He added that the UAE central bank would wait for the euro to fall against the dollar and then buy as it recovered.
“Normally you wait for a downtrend to buy and catch it as it goes up,” he said. He added the UAE central bank favoured investing in US corporate bonds rather than government Treasuries because of their relatively attractive yield.
“We are investing more in US corporate bonds (because) they pay more than Treasuries. We are going for corporate investments more,” Suweidi said.
Speaking after the central bankers’ meeting, Saudi Arabia’s central bank governor said there would be no change in Saudi’s reserve management policy, despite plans by other Gulf countries to switch some of their reserves out of dollars.
Saud al-Sayyari, governor of the Saudi Arabian Monetary Agency, also said there was no possibility of a revaluation of the riyal currency, which like other Gulf currencies is pegged to the US dollar.
The US central bank halted a two-year interest rate raising campaign on August 8, holding its overnight fed funds rate unchanged at 5.25%. Investors bet the Fed will stand pat at its next meeting, on September 20.
By contrast European Central Bank policy makers have left little doubt that Europeans face higher interest rates this year, raising the euro’s yield appeal vis-a-vis the dollar. – Reuters
The Gulf oil exporter’s central bank has decided to convert 10% of its largely dollar-denominated foreign exchange reserves into euros and gold, but Suweidi said the switch had not yet been carried out.
He said no decision had been made yet on gold purchases.
Asked about the outlook for the US dollar and the euro in light of an anticipated pause in the Federal Reserve’s interest rate rises, Suweidi said: “We are waiting to see the outcome of that decision. There’s a shift in the strategy of the Fed. That will entail a new strategy on our side.”
But the UAE was still committed to converting part of its reserves, which stood at $23bn in December, into euros, Suweidi said on the sidelines of a Gulf central bank governors’ meeting in Abu Dhabi, capital of the UAE.
He added that the UAE central bank would wait for the euro to fall against the dollar and then buy as it recovered.
“Normally you wait for a downtrend to buy and catch it as it goes up,” he said. He added the UAE central bank favoured investing in US corporate bonds rather than government Treasuries because of their relatively attractive yield.
“We are investing more in US corporate bonds (because) they pay more than Treasuries. We are going for corporate investments more,” Suweidi said.
Speaking after the central bankers’ meeting, Saudi Arabia’s central bank governor said there would be no change in Saudi’s reserve management policy, despite plans by other Gulf countries to switch some of their reserves out of dollars.
Saud al-Sayyari, governor of the Saudi Arabian Monetary Agency, also said there was no possibility of a revaluation of the riyal currency, which like other Gulf currencies is pegged to the US dollar.
The US central bank halted a two-year interest rate raising campaign on August 8, holding its overnight fed funds rate unchanged at 5.25%. Investors bet the Fed will stand pat at its next meeting, on September 20.
By contrast European Central Bank policy makers have left little doubt that Europeans face higher interest rates this year, raising the euro’s yield appeal vis-a-vis the dollar. – Reuters
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