98% of Central Bank forex reserves in US dollar

The US dollar has remained the dominant component of the UAE Central Bank’s holdings, accounting for nearly 98 per cent of it foreign assets, a senior Central Bank official was quoted on Thursday as saying.

Saif Al Shamsi, Treasury Director at the Central Bank, said the foreign assets have not included any euro or gold holdings for years.

“The US dollar accounts for around 98 per cent of the Central Bank’s foreign currency assets,” he told the semi official daily Alittihad.

“The Central Bank has maintained the dollar as its sole reserve currency because the dihram is pegged to the dollar….this peg will remain in force and there is no intention to change this policy.”

Central Bank data showed its foreign asset holdings stood at Dh82.9 billion at the end of June compared with nearly Dh84.3 billion at the end of May. They stood at around Dh89.8 billion at the end of 2009 and Dh113 billion at the end of 2008.

Its total assets stood at Dh202 billion at the end of June, slightly lower than their level of Dh203.9 billion at the end of 2009 but higher than at the end of 2008, when they were around dh193.7 billion.

At the end of the first half of 2010, the Central Bank’s shareholders equity stood at nearly Dh16 billion.

Like other Gulf countries, the UAE has pegged its currency to the US dollar for more than three decades despite its sharp fluctuations.

Speculation mounted in 2008 that regional nations could end the peg after a weakening in the dollar allied with other factors to boost inflation to one of its highest rates. The speculation also triggered a massive flow of hot money into the region to take advantage of an expected appreciation of local currencies.