GOING GLOBAL EAST MEETS WEST - ARCHIVES: May 2009

Friday, May 1, 2009

GCC currency may be linked to oil, gold ...

May 1, 2009

GCC currency may be linked to oil, gold

GYANENDRA KESHRI - DOHA Commodities, especially oil and gold, are likely to be a part of the basket to which the Gulf Cooperation Council (GCC) countries’ proposed single currency will be pegged, analysts say.

“There is a strong possibility that the GCC countries will include commodities such as oil and gold in the basket to which their proposed common currency will be pegged,” a senior economist and an editor at Economist Intelligence Unit Jane Kinninmont told Qatar Tribune.

She said the inclusion of commodities in the basket would provide a hedge against any big fluctuation in the values of major currencies, especially in the US dollar.

“There is no such precedence. If it happens, it will be the first time that commodities are included in currency basket. But we believe, there is a strong possibility of commodities to be included in the basket,” she added.

On weightage of currencies and commodities in the basket, Kinninmont said the basket was likely to be heavily weighed towards the US dollar because of the pricing of oil and other major commodities in the dollar.

“So long as oil price is quoted in dollar, the GCC currency basket has to be weighed towards the US currency, as we already see in the case of Kuwait,” said Kinninmont, adding the oil exporting countries were keen to look for alternative but it was not easy to find a replacement for the US dollar.

On the possibility of pricing of oil in other currency, she said, “It is possible to price oil in other currency, but I don’t think it is likely because of the political reasons.”

“The inclusion of oil in particular would help the GCC currency to at least partly reflect fluctuations in demand for the GCC’s key export,” Economist Intelligence Unit (EIU) quoted Jamal Shergill, CEO for Middle East and South Asia and head of Global Wealth Management at United Bank for Africa, as saying in a report on the GCC economy in 2020.

Inclusion of commodities in the basket would act as a counterweight to currencies.

Asked whether the US dollar would gradually lose its role as the world’s reserve currency, EIU economist Kinninmont said, “The role of dollar is diminishing gradually because the economies like those of the GCC countries, which are excessively dependent on dollar, have started diversifying their reserves.”

She, however, emphasised that despite all the buzz, the US dollar would continue to remain the world’s reserve currency for the next 10 to 15 years. “I don’t think any other currency is in a position to take over the role of dollar,” she added. She pointed out that the GCC countries that include Qatar, Saudi Arabia, United Arab Emirates, Kuwait, Oman and Bahrain had taken very cautious steps towards diversifying their foreign currency reserves as well as the trading.

“It is good not to rely on one currency because any big fluctuation in the value of one currency could cause instability in the economy,” she remarked.

She said four out of the six GCC countries were likely to adopt single currency by 2015. The GCC common currency was likely to be called Khaleeji, which means ‘of the Gulf ’ in Arabic.

Kinninmont said some countries might start quoting oil in new Gulf currency. “I don’t think it will be traded, but some countries at least might quote oil in the GCC common currency,” she added.

www.qatar-tribune.com/data/20090405/cont...?section=business1_1

GOING GLOBAL EAST MEETS WEST - ARCHIVES

Thursday, May 28, 2009

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Friday, May 1, 2009

GCC currency may be linked to oil, gold ...