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25 June 2024

Kuwait lets dinar rise to record as dollar plunges

By Agencies


Kuwait let the dinar rise for a third trading day to an all-time high against the dollar as the US currency plunged on concerns the financial crisis in the United States will deepen.

The dinar, the currency of the world's seventh-largest oil exporter, will trade 0.38 per cent higher around a mid-point of 0.26600, compared with 0.26700, the central bank said on Monday, bringing its cumulative gain since dropping its peg to the dollar in May to 8.7 per cent.

The dinar, the currency of the only Gulf Arab oil producer to drop its peg, has gained almost 2 per cent since Wednesday.

The dollar plunged across the board on Monday as the spreading US financial crisis led to JPMorgan Chase acquiring stricken investment bank Bear Stearns, stirring fears that more financial firms could become casualties.

The Federal Reserve took more emergency measures to stem the fast-spreading financial crisis, cutting its discount rate on Sunday and opening up discount window lending to major investment banks, a tool not used since the Great Depression.

As the dollar slid 3 per cent against the yen at one point to its lowest since 1995, investors became more convinced that the Fed and other major central banks may have to conduct coordinated dollar-buying intervention to stem the sell-off.

Investors have dumped the dollar on doubts about the Fed's ability to contain the deepening credit market turmoil, which has hobbled its efforts to help the economy by slashing rates and raised the threat of a protracted US economic recession.

The dollar hit a record low versus the Swiss franc and struck a 13-year low beneath 96 yen on deteriorating confidence in US assets from the crisis spawned by the defaults on US subprime mortgages.

Saudi Arabia, the United Arab Emirates and Qatar are among Gulf Arab states under pressure to drop their pegs to the dollar, that force them to match the United States in cutting interest rates at a time when their own economies are surging on record oil prices, fuelling inflation. (Reuters)