April 7, 2009
GCC could include gold in its single currency
Chinese and Russian leaders put an SDR-based reserve currency on the agenda of the G20 summit last week, while Gulf central banks have announced a delay to the 2010 launch of the GCC single currency. Both new currency units could include gold in their currency baskets.
At the 48th meeting of the governors of GCC Monetary Agencies yesterday officials said that the six nations had yet to agree on either a location for a single central bank, or how it would be linked to the US dollar or a basket of currencies and possibly gold.
Russia has openly called for the inclusion of gold in a new global currency based on Special Drawing Rights issued by the IMF. Saudi Arabia has huge gold reserves which it might be keen to use to back the new Gulf single currency basket, but the UAE has no gold reserves.
Gold standard
The Gold Standard was once the anchor of world finance but lost its role in the First World War as government spending spiralled. It was briefly revived and then collapsed in the 1930s economic crisis when the UK, US and France dropped it.
After the Second World War gold became a part of the fixed dollar system until the US abandoned it finally in 1971, again due to the pressure of rising expenditure on the dollar.
It is arguable that the world could not have become so extremely over leveraged in recent years with gold as a market discipline. Both Russia and China are major gold producers so that is an additional reason for them to favor gold.
In the GCC officials said national leaders will meet next month to decide the location of the new combined central bank, with Abu Dhabi thought to be the front runner. Only then will proposals be forthcoming about how the currency union is to be formed.
Dollar peg
However, GCC leaders are keen to find a way to avoid the exaggerated swings in the business cycle that come with the existing dollar peg, and Kuwait has already had some success with its currency basket - all the other GCC national currencies are pegged to the US dollar.
The inclusion of gold and even silver into a currency basket is bound to be taken more seriously in view of the Russian and Chinese initiatives. The Kremlin has already told the central bank to slowly raise gold to a 10 per cent share of its foreign reserves.
In a world of inflation and competitive devaluations the role of gold as honest money that can not be printed is obvious enough.
ArabianMoney.Net
____
Wednesday, April 29, 2009
GCC currency may be used to price oil
Gulf oil producers are expected to dump the US dollar and use their planned single currency in pricing their oil exports when they launch their landmark monetary union, a prominent financial expert said yesterday.
Nasser Al Saidi, Chief Economist at Dubai International Financial Centre (DIFC) Authority, said he expected the GCC countries to peg their common currency to a basket of global currencies of which the dollar and the euro will be the main components.
Speaking to Emirates Business at an international investment conference in Abu Dhabi, Saidi expected the common Gulf currency to become a strong global currency on par with other major currencies given what he described the enormous fiscal and oil resources of the bloc members.
"Since the GCC countries control more than 45 per cent of the world's proven oil reserves, it would be more than natural to price our main [oil] exports in our own currency. I think this is a sensible and realistic approach," he said.
GCC states – the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman – have long been under domestic pressure to dump the US dollar in pricing their oil exports on the grounds their revenues have suffered from sharp fluctuations because of the dollar's volatility and weakening against other key currencies.
But they have opted to stick to the dollar since the currencies of most of them are effectively pegged to the US greenback.
Official figures showed that the income of the GCC and other Arab oil producers has been severely hit by the weakening of the dollar and higher global inflation. The problem was complicated by a steady, rapid growth in their population and consequently, development and infrastructure needs. In current prices, the 11-nation Organisation of Arab Petroleum Exporting Countries (Oapec) is projected to have earned in excess of $600bn from crude oil sales in 2008, its highest nominal income.
But in real terms, the revenues were lower by nearly $180bn, taking into account the dollar's 1995 value and inflation in industrial oil consumers.
Independent estimates put Oapec's nominal oil export earnings at around $610bn in 2008.
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
Riyadh will be the location of a monetary council for the Gulf Co-operation Council
Wednesday, May 06, 2009
No timeline for common currency, says Attiyah
Riyadh will be the location of a monetary council for the Gulf Co-operation Council - a precursor for a central bank, the group's leaders agreed yesterday in a step towards creating a common currency for the region.
"The monetary council will be a transitional phase towards establishing a central bank," said Abdulrahman bin Hamad Al Attiyah, the Secretary-General of the GCC.
The proposed central bank, with the Gulf's immense oil wealth behind it, could be one of the world's largest combining the region's vast assets, which together form the world's fifth-biggest economy.
Al Attiyah said there is no timeline for the introduction of a common currency in the Gulf countries, and the monetary council will decide on the structure of a unified central bank in future negotiations.
"It's good news that a decision was taken," said John Sfakianakis, chief economist at Saudi British Bank, in a telephone interview. "It shows a clear impetus from the Saudi side to push ahead with the currency union."
www.business24-7.ae/Articles/2009/5/Page...0dd010553ee0d55.aspx
___
18 May, 2009
Saudi Cabinet approves GCC monetary accord
The Saudi Cabinet approved today the signing of the GCC monetary union agreement.
The official Saudi Press Agency (SPA) said necessary measures would be taken with regard of the charter of the monetary council.
GCC leaders, at their summit, held in Riyadh early this month, declared choosing Riyadh as the venue of the headquarters of the central bank of the GCC but did not discuss the prospected date for the launch of the common currency of the GCC.
SPA quoted Minister of Culture and Information Abdel Aziz Khojah as underscoring significance of talks held recently by the king with foreign officials and the holding of several conferences locally.
_____
17 June 2009
GCC nationals suggest names for proposed common currency
DOHA: Qatar's riyal does not figure among the names suggested by GCC nationals for the proposed common currency of the Gulf in a survey conducted by Al Sharq.
Dinar, dirham and nira were some of the most common names suggested for the proposed GCC common currency in the survey.
The common currency is the talk of the town among GCC nationals. Despite the announcement by the United Arab Emirates that it was opting out of the currency plan, many GCC nationals are proposing names for the common currency.
The four countries that have signed the agreement to have a currency union are Qatar, Saudi Arabia, Bahrain and Kuwait. Both Qatar and Saudi Arabia use riyal as the name for their currency, while Bahrain and Kuwait use dinar.
Al Sharq surveyed a number of GCC nationals asking them what their suggestion was for the name of the proposed common regional currency.
Almost all of those who were surveyed agreed that the name of the currency should reflect the history of paper currency in the Arab world.
"Even though it has been suggested that the new currency will not have the name of any of the currencies currently being used, to eliminate any sensitivities between the member countries, I still recommend using the name of dinar, due to its historical relevance in our region," said Mariam Al Mutairi from Kuwait.
Ali Al Hadi from Saudi Arabia suggested using the name dana (regional name for a large pearl). "Pearl diving is synonymous with the history of the GCC. I believe that we should be proud of that history we all share here, and using the name dana would reflect the pride we share in our history".
"Due to its use as an early Islamic currency and its mention in the Holy Quran, dinar should be the new name, and then have it divided into riyals. Dinar is also commonly used in early literature and poetry, and plays a significant role in Arabic linguistics," said Bader Al Mannai from Bahrain.
Originally slated for adoption in 2010, it is said the current deadline for establishment of the monetary union would not be met due to the financial crisis and lack of cooperation between the GCC member states.
© The Peninsula 2009
GCC could include gold in its single currency
Chinese and Russian leaders put an SDR-based reserve currency on the agenda of the G20 summit last week, while Gulf central banks have announced a delay to the 2010 launch of the GCC single currency. Both new currency units could include gold in their currency baskets.
At the 48th meeting of the governors of GCC Monetary Agencies yesterday officials said that the six nations had yet to agree on either a location for a single central bank, or how it would be linked to the US dollar or a basket of currencies and possibly gold.
Russia has openly called for the inclusion of gold in a new global currency based on Special Drawing Rights issued by the IMF. Saudi Arabia has huge gold reserves which it might be keen to use to back the new Gulf single currency basket, but the UAE has no gold reserves.
Gold standard
The Gold Standard was once the anchor of world finance but lost its role in the First World War as government spending spiralled. It was briefly revived and then collapsed in the 1930s economic crisis when the UK, US and France dropped it.
After the Second World War gold became a part of the fixed dollar system until the US abandoned it finally in 1971, again due to the pressure of rising expenditure on the dollar.
It is arguable that the world could not have become so extremely over leveraged in recent years with gold as a market discipline. Both Russia and China are major gold producers so that is an additional reason for them to favor gold.
In the GCC officials said national leaders will meet next month to decide the location of the new combined central bank, with Abu Dhabi thought to be the front runner. Only then will proposals be forthcoming about how the currency union is to be formed.
Dollar peg
However, GCC leaders are keen to find a way to avoid the exaggerated swings in the business cycle that come with the existing dollar peg, and Kuwait has already had some success with its currency basket - all the other GCC national currencies are pegged to the US dollar.
The inclusion of gold and even silver into a currency basket is bound to be taken more seriously in view of the Russian and Chinese initiatives. The Kremlin has already told the central bank to slowly raise gold to a 10 per cent share of its foreign reserves.
In a world of inflation and competitive devaluations the role of gold as honest money that can not be printed is obvious enough.
ArabianMoney.Net
____
Wednesday, April 29, 2009
GCC currency may be used to price oil
Gulf oil producers are expected to dump the US dollar and use their planned single currency in pricing their oil exports when they launch their landmark monetary union, a prominent financial expert said yesterday.
Nasser Al Saidi, Chief Economist at Dubai International Financial Centre (DIFC) Authority, said he expected the GCC countries to peg their common currency to a basket of global currencies of which the dollar and the euro will be the main components.
Speaking to Emirates Business at an international investment conference in Abu Dhabi, Saidi expected the common Gulf currency to become a strong global currency on par with other major currencies given what he described the enormous fiscal and oil resources of the bloc members.
"Since the GCC countries control more than 45 per cent of the world's proven oil reserves, it would be more than natural to price our main [oil] exports in our own currency. I think this is a sensible and realistic approach," he said.
GCC states – the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman – have long been under domestic pressure to dump the US dollar in pricing their oil exports on the grounds their revenues have suffered from sharp fluctuations because of the dollar's volatility and weakening against other key currencies.
But they have opted to stick to the dollar since the currencies of most of them are effectively pegged to the US greenback.
Official figures showed that the income of the GCC and other Arab oil producers has been severely hit by the weakening of the dollar and higher global inflation. The problem was complicated by a steady, rapid growth in their population and consequently, development and infrastructure needs. In current prices, the 11-nation Organisation of Arab Petroleum Exporting Countries (Oapec) is projected to have earned in excess of $600bn from crude oil sales in 2008, its highest nominal income.
But in real terms, the revenues were lower by nearly $180bn, taking into account the dollar's 1995 value and inflation in industrial oil consumers.
Independent estimates put Oapec's nominal oil export earnings at around $610bn in 2008.
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
Riyadh will be the location of a monetary council for the Gulf Co-operation Council
Wednesday, May 06, 2009
No timeline for common currency, says Attiyah
Riyadh will be the location of a monetary council for the Gulf Co-operation Council - a precursor for a central bank, the group's leaders agreed yesterday in a step towards creating a common currency for the region.
"The monetary council will be a transitional phase towards establishing a central bank," said Abdulrahman bin Hamad Al Attiyah, the Secretary-General of the GCC.
The proposed central bank, with the Gulf's immense oil wealth behind it, could be one of the world's largest combining the region's vast assets, which together form the world's fifth-biggest economy.
Al Attiyah said there is no timeline for the introduction of a common currency in the Gulf countries, and the monetary council will decide on the structure of a unified central bank in future negotiations.
"It's good news that a decision was taken," said John Sfakianakis, chief economist at Saudi British Bank, in a telephone interview. "It shows a clear impetus from the Saudi side to push ahead with the currency union."
www.business24-7.ae/Articles/2009/5/Page...0dd010553ee0d55.aspx
___
18 May, 2009
Saudi Cabinet approves GCC monetary accord
The Saudi Cabinet approved today the signing of the GCC monetary union agreement.
The official Saudi Press Agency (SPA) said necessary measures would be taken with regard of the charter of the monetary council.
GCC leaders, at their summit, held in Riyadh early this month, declared choosing Riyadh as the venue of the headquarters of the central bank of the GCC but did not discuss the prospected date for the launch of the common currency of the GCC.
SPA quoted Minister of Culture and Information Abdel Aziz Khojah as underscoring significance of talks held recently by the king with foreign officials and the holding of several conferences locally.
_____
17 June 2009
GCC nationals suggest names for proposed common currency
DOHA: Qatar's riyal does not figure among the names suggested by GCC nationals for the proposed common currency of the Gulf in a survey conducted by Al Sharq.
Dinar, dirham and nira were some of the most common names suggested for the proposed GCC common currency in the survey.
The common currency is the talk of the town among GCC nationals. Despite the announcement by the United Arab Emirates that it was opting out of the currency plan, many GCC nationals are proposing names for the common currency.
The four countries that have signed the agreement to have a currency union are Qatar, Saudi Arabia, Bahrain and Kuwait. Both Qatar and Saudi Arabia use riyal as the name for their currency, while Bahrain and Kuwait use dinar.
Al Sharq surveyed a number of GCC nationals asking them what their suggestion was for the name of the proposed common regional currency.
Almost all of those who were surveyed agreed that the name of the currency should reflect the history of paper currency in the Arab world.
"Even though it has been suggested that the new currency will not have the name of any of the currencies currently being used, to eliminate any sensitivities between the member countries, I still recommend using the name of dinar, due to its historical relevance in our region," said Mariam Al Mutairi from Kuwait.
Ali Al Hadi from Saudi Arabia suggested using the name dana (regional name for a large pearl). "Pearl diving is synonymous with the history of the GCC. I believe that we should be proud of that history we all share here, and using the name dana would reflect the pride we share in our history".
"Due to its use as an early Islamic currency and its mention in the Holy Quran, dinar should be the new name, and then have it divided into riyals. Dinar is also commonly used in early literature and poetry, and plays a significant role in Arabic linguistics," said Bader Al Mannai from Bahrain.
Originally slated for adoption in 2010, it is said the current deadline for establishment of the monetary union would not be met due to the financial crisis and lack of cooperation between the GCC member states.
© The Peninsula 2009
