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Dubai: The United Arab Emirates will keep its dirham currency's peg to the US dollar for at least 12 months, the Gulf oil exporter's central bank governor told Bloomberg on Thursday.
"In 12 months I can say to you that the UAE will maintain the peg," Bloomberg quoted Sultan Nasser Al Suwaidi as saying without reporting the question to which he was responding.
"We have come to the conclusion that the inflation problem does not lie with the peg against the US dollar," he said.
Mounting pressure
The UAE dirham hit a 17-year high in November after Suwaidi said he was under mounting social and economic pressure to sever the dirham's peg and track a currency basket.
Gulf rulers agreed at a summit in Qatar in Dec-ember to retain dollar pegs and keep any talks on currency reform secret. Suwaidi last week declined to say whether he was studying revaluing the dirham.
Gulf countries are struggling to control surging inflation, without being able to raise interest rates - because most peg their currencies to the dollar, they have been obliged to cut rates in line with the US Federal Reserve.
Price rise
Price rises in the UAE, the second-largest Arab economy, were 9.3 per cent in 2006, the highest since at least 1988.
The UAE matched a 25-basis-point Fed cut this month to ensure investors would not make higher returns in their dollar-pegged currencies than they would get in US deposits.
UAE inflation will accelerate to a new 19-year high of 10.1 per cent last year before easing to 8.9 per cent this year, a Reuters poll of 12 economists forecast last month.
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