UAE forex reserves jump most in 18 years

Dubai: The UAE’s foreign exchange reserves surged 50 per cent to $75 billion in November, data showed yesterday, shedding new light on central bank concern that month about the dirham currency’s dollar peg. The data for November, the latest available, showed reserves growing at their fastest pace in at least 18 years, increasing inflation pressures that probably took the rate of price growth in the country into double digits last year. UAE Central Bank Governor Sultan Nasser Al Suwaidi said in November the state was under pressure to drop its peg to the declining dollar and might consider linking to a basket instead. However, on Wednesday, the government accepted a committee’s recommendation to keep the peg at the current rate. « The November [reserves] numbers do not bode well for the UAE’s inflation outlook, » said Caroline Grady, economist at Deutsche Bank in London. « Via the money multiplier, the sharp increase in the money base could well feed through into broad money and inflation. » Reserves jumped from $50.4 billion in October, the biggest rise since data going back to 1990, according to the data provided by a central bank treasury official who did not want to be identified. Inflation in the UAE rose to a 19-year high of 9.3 per cent in 2006 and probably accelerated to 10.9 per cent last year, according to National Bank of Abu Dhabi. Source: Reuters