Gulf Countries Should Abandon Dollar Peg, Taylor Says (Update1)
March 01, 2010, 6:42 AM EST(Adds Taylor’s comments in second paragraph.)
By Haris Anwar and Camilla Hall
March 1 (Bloomberg) -- John Taylor, who oversees the world’s largest currency hedge fund as chairman of New York- based FX Concepts Inc., said Gulf states should float their currencies, ending their currency pegs to the U.S. dollar.
The Gulf region “should be able to drive their own boat in the rough seas,” Taylor told a conference in Dubai today. The fixed exchange rates make the region vulnerable to U.S. economic weakness, he said. “Floating is a better strategy.”
Taylor’s views are in contrast to those of the Washington- based International Monetary Fund. John Lipsky, the IMF’s first deputy managing director, said Nov. 20 that the currency pegs have served the region well. Inflation in the Gulf Arab states has slowed from record highs in 2008, easing speculation that the countries would drop the pegs or revalue their currencies. Kuwait dropped its dollar peg in 2007 and fixed the exchange rate to a basket of currencies, the only country in the region to alter its policy.
Four Gulf states are working toward a single currency which may see them step away from a dollar peg. The board of the monetary council that will determine the new system is made up of the central bank governors of Kuwait, Saudi Arabia, Bahrain and Qatar. Oman and the United Arab Emirates have opted out.
--Editors: Philip Sanders, Heather Langan
To contact the reporters on this story: Haris Anwar in Dubai at hanwar2@bloomberg.net; Camilla Hall in Abu Dhabi at chall24@bloomberg.net.
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net.
