Kuwait central bank allows 0.4 pct appreciation of Kuwait dinar

LONDON (Thomson Financial) - Kuwait's central bank has allowed the Kuwait dinar to appreciate by 0.4 pct, just six weeks after a similar move in May and reflecting the recent fall in the dollar to record lows against the euro.

The central bank's intervention rate now stands at 0.28685-0.28695 against the dollar, compared with 0.28801-0.28811 previously, according to the bank's website.

'As the US dollar weakness persisted over the past few weeks, it was a surprise that the Central Bank (other-otc: CHPA.PK - news - people ) of Kuwait did not adjust the intervention rate earlier,' said HSBC (nyse: HBC - news - people ) analyst Simon Williams.

Today's move comes after a Kuwaiti parliamentary committee yesterday expressed concern about the currency's valuation and urged the government to allow the dinar to appreciate in order to reflect the value of the US dollar.

At the time of the May revaluation, the central bank announced it was pegging the value of the dinar against a basket of currencies, rather than just against the dollar.

Following today's move, analysts at Standard Chartered have estimated that this basket consists of 70 pct US dollar, 20 pct euro, 5 pct Japanese yen and 5 pct sterling.

This makes any future moves highly dependent on the outlook for the US dollar, particularly against the euro.

The euro today hit a new record high against the dollar of 1.3797 usd, with 1.40 usd the next key level as far as further Kuwaiti revaluation is concerned, Standard Chartered believe.

'If the euro moved above 1.40 usd, this would push the Kuwaiti authorities into revaluing again,' said Steve Brice, regional head of research for the Middle East at Standard Chartered.

Kuwait's move, however, is unlikely to be followed by other Gulf states such as the United Arab Emirates or Qatar.

'We doubt that Kuwait's decision will have major implications for the currency reform debate in the rest of the Gulf Cooperation Council,' not even if the US dollar were to fall sharply from its current levels, Brice said.

He pointed to the fact that the UAE has previously said it will not make any move on currency flexibility unless the whole of the rest of the region does so, including Saudi Arabia. Qatar meanwhile has indicated it will retain its currency peg for at least three years.

'Kuwait remains the country to focus on in 2007 before changes are seen elsewhere in the region in the coming years,' Brice said.

Iraq’s draft oil law heads for parliament after cabinet nod

Published: Wednesday, 4 July, 2007, 02:14 AM Doha Time

AMMAN/DUBAI: The Iraqi cabinet yesterday approved an amended version of the controversial draft oil and gas law and will submit the document to parliament for final approval, an Iraqi government official said. “The cabinet has endorsed the draft oil and gas law and it will submit it to parliament,” Oil Ministry spokesman Assem Jihad told Dow Jones Newswires. The Iraqi cabinet will send the controversial to parliament today, top oil and gas adviser to Prime Minister Nouri al-Maliki said. “The cabinet has approved the draft oil and gas law and it will send it to parliament for approval Wednesday,” Thamer al-Ghadhban told Dow Jones Newswires. It isn’t known, however, if the cabinet has endorsed only one part of the law which deals with the distribution of oil revenues among Iraqi regions and governorates or the whole bill. Al-Ghadhban said last week that negotiations on other disputed clauses of the law would take two months before they could be settled and after that the law would go to parliament. The draft law was first approved by al-Maliki’s cabinet in February but new disputes then emerged between the central government in Baghdad and the northern Kurdistan Regional Government that have delayed it. The law is meant to bring in international oil companies to invest in Iraq’s potentially lucrative oil fields whose estimated proven oil reserves could reach 115bn barrels. The US Administration has been urging Iraqi leaders to speed up the enactment of the hydrocarbon law along with other laws that it says are crucial to national reconciliation. Iraqi oil officials couldn’t be reached to comment on the new amendments made to the draft law. Officials of the Kurdistan Regional Government had been in dispute with their counterparts in the federal government in Baghdad over who should control untapped oil fields. An old version of the draft law proposed that most of these oil fields are to be controlled by a yet-to-be-established national oil company. The Kurds rejected that provision of the law. But both sides reached last month an agreement on the distribution of oil revenues, under which the Kurds would get up to 17% of these revenues on monthly basis after deducting federal government expenditure. Meanwhile, the International Monetary Fund said Iraq is accumulating foreign currency reserves through oil sales hasn’t drawn on cash available through the Fund, even as fighting devastates much of the country. “The economy hasn’t really got going, but at the same time, oil prices have helped them a lot, so they have been generating quite large surpluses,” Mohsin Khan, the IMF’s director for the Middle East and Central Asia, said in a telephone interview from Washington on Monday. The accumulation of reserves will help defend the value of the dinar and slow inflation, which accelerated to 65% last year, according to the Central Bank of Iraq. The central bank raised its benchmark interest rate to 20% in January from 16%, and consumer prices rose 2.3% from December to May, central bank data shows. Iraq has had a standby programme with the IMF since the beginning of 2006, and will maintain it until the end of 2008, as a condition for a debt relief programme negotiated with the so- called Paris Club. The country has foreign reserves of about $23bn, $18bn of which is held by the Central Bank of Iraq, and the remainder by the Development Fund for Iraq, Khan said on Monday. – Dow Jones Newswires, Bloomberg