DUBAI, 28 February 2008 — The United Arab Emirates should drop its dirham currency’s peg to the dollar to help fight soaring inflation, the chief executive of a Saudi Arabian real estate firm said.

Abdulraman Al-Tassan, chief executive of Rakaa Properties, is the latest business leader to call on the second-largest Arab economy to sever its link to the dollar as it tackles inflation which hit a 19-year peak of 9.3 percent in 2006.

“The long-awaited decision on whether to de-peg the GCC currencies from the dollar is one possible effective solution” to combat inflation, Tassan said in a statement issued yesterday on the impact of a regional real estate boom on inflation.

Rakaa Properties, the real estate arm of Riyadh-based conglomerate Rakaa Holding, is developing a $272 million project on Abu Dhabi’s Reem Island.

UAE business leaders — including Khalaf Al-Habtoor, chairman of conglomerate Al-Habtoor Group, and Dubai Properties Chief Executive Mohammed Binbrek — made calls for an end to the dollar peg in December in a report in the daily Emirates Business 24/7.

Surging inflation in the Gulf has fueled speculation that some countries may either revalue their currencies or drop their pegs to the dollar, which hit a record low against the euro yesterday.

UAE inflation probably accelerated to 10.9 percent last year on surging rents, National Bank of Abu Dhabi said this week.

“Al-Tassan agreed with the call to de-peg the dirham from the dollar,” the Rakaa statement said. Inflation had “undermined the competitiveness of Gulf countries for residents who are beginning to rethink the feasibility of remaining”, it said.

UAE Central Bank Governor Sultan Nasser Al-Suweidi called for currency reform in November after South Asian construction workers rioted in Dubai over savings lost to dollar weakness. Suweidi has since backtracked on those remarks.

Dollar pegs force Gulf states to track US interest rate cuts even though their economies are surging on a near five-fold jump in oil prices since 2002.

UAE dirham forward widened yesterday after former US Federal Reserve Chairman Alan Greenspan commented in favor of currency reform, renewing bets on Gulf Arab currency revaluations.

Forward showed investors betting on a 3 percent appreciation in the dirham in a year and 4.6 percent in two years at 1120 GMT.

Speaking at conferences in Saudi Arabia and the United Arab Emirates on Monday, Greenspan said near-record Gulf Arab inflation would fall “significantly” were the oil producers to drop their dollar pegs and float their currencies freely.

“When Alan Greenspan talks, people listen to him,” said Jason Goff, head of group treasury and market sales at Emirates Bank International Ltd.

“A good part of speculation on Gulf currencies is outside of the Gulf. What Greenspan says carries weight in the market,” he said.

The Qatari riyal is about 30 percent undervalued as a result of dollar weakness, the Gulf state’s prime minister told Reuters on Saturday.

Exchange rate weakness was contributing to about 40 percent inflation that hit 13.74 percent in the fourth quarter, just off a record, Sheikh Hamad ibn Jassim ibn Jabr Al-Thani said. Qatar is studying revaluing its riyal among options to combat inflation, Sheikh Hamad said.

Qatari riyal forward showed investors expecting a 2.6 percent appreciation in nine months while bets on the Saudi riyal were for a gain of 1.9 percent in a year at 1125 GMT.