Dirham revaluation bets intensify
One-year UAE dirham forwards slid to a record deep discount on Monday, reflecting speculation of a revaluation against the plummeting US dollar as Kuwait's currency rose to a record high.
The forward market, which reflects where dealers expect the currency to trade in 12 months, is often used by speculators to bet on a shift in exchange rate pegs such as the dirham's link to the dollar.
The move in the forward market comes after Kuwait let the dinar rise to an all-time high against the dollar earlier on Monday.
"Kuwait revalued yesterday and again this morning. With the euro above $1.57, oil above $110 and the Fed willing to lower interest rates, that's moved all the forwards," said Wike Groenenberg, emerging markets strategist at Citi.
"The UAE is seen most likely to revalue, while Saudi Arabia is the most conservative."
The United Arab Emirates central bank has launched a study into a revaluation of the dirham, and the study is expected to report its findings at the end of 2008, London-based MEED reported late on Friday, citing a bank official.
One-year dirham forwards were trading at -1450/1150.
Saudi riyal 1-year forwards were trading at -900/800, the deepest discount since December. (Reuters)
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