DUBAI, 10 January 2008 — Most executives in the Gulf Arab region expect Gulf currencies to appreciate against the dollar this year, and nearly half said this would help their businesses, a HSBC survey showed.

Of the 1,082 businessmen and women surveyed by HSBC last month in the world’s biggest oil-exporting region, 59 percent expect Saudi Arabia and four neighbors that peg their currencies to the dollar to revalue by the end of the year.

Some 47 percent of respondents said this would “have a positive impact on their business,” HSBC said in a statement yesterday. Only 17 percent said it would hurt their businesses.

Dollar pegs force the region to shadow US interest rates at a time when the Federal Reserve is cutting rates to contain a credit crisis and inflation is running at decade highs across the Gulf. Markets piled pressure on Gulf currencies last year as speculation mounted that more countries would follow Kuwait and abandon their links to the declining dollar.

partly to curb imported inflation.

“Inflation, human resources and currency revaluations have emerged as major issues facing the region’s businesspeople,” said Antoine Cahuzac, HSBC Chief Executive of global banking in the Middle East.

Gulf companies, including Saudi Basic Industries Corp (SABIC) and Emirates Telecommunications Corp (Etisalat), have been raising wages as price rises accelerate.

About 35,000 construction workers also went on strike in Dubai in November to protest over wages before a settlement was reached.

Fifty seven percent of respondents in the HSBC survey said inflation had a “negative impact” on their operations, up from 36 percent in a first-quarter survey. Price rises in Saudi Arabia hit 5.35 percent in October, the highest in at least 12 years, while inflation in the United Arab Emirates touched a 19-year peak of 9.3 percent in 2006.

In Qatar, inflation is just off a record 15 percent. Bahrain and Oman are also part of the Gulf Arab region. “The impact of inflation has become a major headache for business,” HSBC said.

Kuwait has allowed its dinar to rise almost 6 percent since it began tracking a currency basket last May.

UAE Central Bank Governor Sultan Nasser Al-Suweidi said in November he was under growing pressure from “companies and communities” to drop the peg and track a currency basket including the euro to contain inflation.

Al-Suweidi backtracked after Gulf Arab rulers agreed at a summit in December to keep their dollar pegs.