LONDON, 23 June 2006 — The United Arab Emirates central bank has made no decision yet on diversifying its foreign exchange reserves and the current dollar ratio is appropriate, the bank’s Governor Sultan Nasser Al-Suweidi said yesterday. However, he told Reuters in an interview that a shift remains the bank’s long-term objective. “The board is making the decision but it has not taken the decision yet,” he said on the sidelines of a conference in London.
“The UAE economy is evolving and it is important to diversify (FX reserves). We need to diversify, not for any reason except that we have to move away from just (having) a single currency. Otherwise you get caught in the wrong corner... Diversification is a long-term objective.”
The central bank of the UAE, an oil-exporting federation of seven emirates, has been keeping markets guessing about its plans to convert 10 percent of its reserves from dollars to euros, announced earlier this year.
UAE central bank foreign reserves, which stood at $23 billion in December, are held almost entirely in dollars.
“We do have a high ratio of dollars but this is appropriate because the dollar is the currency for international trade and for investment,” Al-Suweidi said yesterday.
The central bank controls only part of the foreign exchange reserves of the UAE. Other major holders include the investment arms of the emirates’ governments. Some analysts say official FX reserves make up less than 10 percent of Gulf Arab government holdings.
The UAE is one of six members of the Gulf Cooperation Council economic and political alliance, along with Saudi Arabia, Kuwait, Qatar, Bahrain and Oman.
