UPDATE 2-Paulson says dollar peg has served Mideast well
May 31st, 2008 | by admin |(Adds detail, background, quotes)
By David Lawder and Souhail Karam
JEDDAH, May 31 (Reuters) - U.S. Treasury Secretary HenryPaulson said on Saturday the dollar peg for currencies in theGulf Arab countries had served the region well and any changesto the peg would be a sovereign matter.
Dollar pegs in all Gulf Arab states except Kuwait forcetheir respective central banks to match U.S. interest rate cuts,and has helped fuel inflation as their economies are booming dueto record oil prices.
This also reduces their purchasing power for goodsdenominated in other currencies.
Asked about his concerns over the dollar peg, Paulson, on avisit to Saudi Arabia, Qatar and the United Arab Emirates, tolda news conference:
“That is a sovereign decision … The dollar peg, I think,has served this country (Saudi Arabia) and this region well.That speaks for itself.”
Qatar’s top economic policy adviser Ibraham al-Ibrahim wasquoted late on Friday as saying that Qatar must de-link itscurrency from the dollar peg.
But Saudi Finance Minister Ibrahim al-Assaf, who joinedPaulson in the news conference after a series of meetings,reaffirmed his committment to the dollar peg.
