The United Arab Emirates (UAE) will keep its currency, the dirham, pegged to the US dollar despite the S&P's downgrade of the US economy, Albadawa news said on Thursday, quoting an official. “We are pegged to the dollar and will keep it. We don't expect the dollar to collapse as the problem is not in the US alone, but also in the European markets,” it quoted Mohamad Al-Tamimi, Deputy Executive Director at the UAE Central Bank Treasury Department, as saying. Albadawa said Oman also sees no risks in investing in US treasuries and that except for Kuwait, all Gulf currencies are pegged to the dollar. Gulf states are also major investors in US treasuries. Al-Tamimi said the US downgrade was not unexpected, although its timing came earlier than anticipated, according to Albadawa. Al-Tamimi said that there were no alternatives to investing in the US market as it was still “the most liquid and safest market”. In July the UAE Central Bank announced that it does not own any US Treasury bonds or government financial instruments. “But if the yields increase to a justified level, there is no reason why we will not invest in US treasuries,” Al-Tamimi said. Albadawa said Oman has decided to adhere to US treasury bonds and will not make any rash decisions. It quoted an unnamed senior Omani government official as saying that Oman is closely monitoring the situation and “don't want to rush into a decision”. Kuwait is said to be the only Gulf country which pegs its currency to a basket of currencies, though it is heavily dollar-weighted. It detached itself from the dollar in 2007 in a bid to rein in inflation.
