Tuesday, July 17, 2007

Kuwait revalues dinar

by Reuters on Thursday, 12 July 2007

Kuwait allowed its dinar to appreciate 0.4% against the dollar today in its second revaluation this year, as the US currency tumbled to a record low against the euro.

The dinar would trade at 0.28690 per dollar against the previous rate of 0.28806 set on May 20 when the world's seventh largest oil exporter abandoned its dollar peg and adopted a basket of currencies, the central bank said.

The May 20 move allowed an appreciation of 0.37%.

The central bank said at the time it wanted to contain the impact of the dollar's slide on imports, which was driving up inflation.

Analysts, including those at Deutsche Bank and Standard Chartered, had expected Kuwait to move again this year, especially if the dollar continued to weaken.

On Wednesday, a Kuwait parliament committee urged the government to allow the dinar currency to reflect the real value of the U.S. dollar, which hit a fresh low against the euro on Wednesday and a 26-year trough against sterling.

Kuwait had pegged its dinar to a currency basket until it adopted a dollar peg in 2003 to prepare for regional monetary union by 2010.

The basket used by Kuwait until then was 85% in dollars, 10% in euros and 5% in sterling, Standard Chartered's regional head of research Steve Brice said in a note on June 28.

The central bank has not disclosed the composition of the new basket, saying only that it consisted of the currencies Kuwait uses for imports and investment.

The timetable for monetary union has been in doubt since Oman said last year it would not meet the deadline.

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