Merrill Lynch & Co. predicts either the United Arab Emirates or Qatar will cut their dollar peg within half a year. Standard Chartered Plc says the six Gulf Cooperation Council nations need to raise the value of their currencies 20 percent. The difference between the price of the Saudi Arabian riyal and the cost of buying it in a year using forward contracts has widened 10-fold since October as traders bet the kingdom will sever its 21-year-old link to the dollar, according to data compiled by Bloomberg.
A currency is an important asset for any country. The Arabs understand this idea very well.
The reason they want to cut their dollar peg is that their currency will appreciate and they will be able to invest their enormous surplus by buying foreign assets at a discount.
Why not! Hello Mr. Bush, Mr. Paulson, Mr. Bernanke...are you listening?
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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