There's nothing to worry about on UAE dirham, liquidity
Date
6/5/2016 11:49:37 PM
(MENAFN- Khaleej Times) Central Bank of the UAE Governor Mubarak Rashid Al Mansouri said on Sunday that he doesn't believe there is any pressure on the Gulf Arab state's currency and that any volatility seen in the forwards market has been limited.
He reiterated that the UAE would continue with the dirham's peg of 3.6725 to the US dollar. The outlook for the country's banking sector is improving after a difficult start to 2016, aided by an improvement in oil prices, which hit the $50 per barrel level for the first time in 2016 on May 26, Al Mansouri told reporters on the sidelines of an Arab finance ministers event in Abu Dhabi. The pressure in the forwards "is very little",Al Mansoori said. "Our economy is very solid. We're continuing with the peg." The dirham has weakened to a premium of around 60 points against the dollar in the one-year forwards market since last August from around zero previously, as low oil prices have created concern about the state finances and external positions of the Gulf oil exporters. But the movement has been smaller in dirham forwards than it has been for some other Gulf currencies such as the Saudi riyal, because the UAE is believed to have stronger government finances and a more diversified economy. The dirham has rebounded from around 200 points hit in December and January. Month-on-month deposit growth in the banking system stalled in January and February because of low oil prices, but expansion has since resumed, according to the latest central bank data. Twelve-month forward contracts for the dirham climbed 22.5 points in the five days through Friday to 122.5, the highest level since March 15, according to data compiled by Bloomberg. Last week, Saudi Arabia ordered banks in the kingdom to stop selling some products that allow speculators to bet against its currency peg just days after demanding information from lenders on the offerings, according to people with knowledge of the matter. One-year forward contracts on the Saudi riyal quoted outside of the country jumped by the most since May 26 on Friday.
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