Thursday, January 25, 2007

Kuwait May Abandon Dollar Peg to Protect its Economy

Jan. 24 (Bloomberg) -- Kuwait, the third-largest Arab oil producer, may abandon the dinar's peg against the dollar in favor of a basket of currencies to help minimize economic harm after the dollar declined.

``We might go to a basket for an interim period,'' Bader al- Humaidhi, Kuwait's finance minister, told reporters today at the World Economic Forum in Davos, Switzerland. ``The dollar fell a lot against the euro last year, but if we'd been linked to a basket we wouldn't have suffered'' as much.

Al-Humaidhi declined to comment on which currencies might be in the basket. A switch from the dollar is being studied by Kuwait's central bank, he said. The Kuwaiti dinar rose to 0.28915 against the dollar as of 4 p.m. in London, from 0.28920 yesterday, according to Bloomberg data.

Dollar reserves are being replaced with euros by oil producers including the United Arab Emirates and Venezuela. China, which has the world's largest foreign-exchange reserves, and Indonesia say they plan to increase euro reserves and Iran says it's boosting oil sales priced in euros.

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