Nearly all UAE's $33bn forex reserves 'in dollars'

The UAE Central Bank holds nearly all of its foreign exchange reserves, worth around $33 billion (Dh121bn), in US dollars with no euros on its balance sheet, a senior Central Bank official told Reuters yesterday.

The UAE, the world's third largest oil exporter and home to one of the largest sovereign wealth funds, keeps its reserve profile in currencies aside from the greenback low due to its dirham peg to the US dollar.

"Our foreign exchange reserves are around $33bn," said Mohamed Al Tamimi, Deputy Executive Director at the Central Bank's treasury department.

"This is for the simple reason that we do not have euros to sell as our foreign exchange reserves are almost 100 per cent in the US dollars. The Central Bank currently does not hold euros in its foreign exchange reserves," he said.

Central banks in the Gulf, the world's top oil exporting region, usually do not disclose the composition of their foreign currency reserves.

A report said last week that China was reviewing its euro zone bond holdings because of growing concerns about large deficits in countries such as Greece and Portugal turned the global market focus to reserve management.

The euro hit a four-year low of $1.2110 on Tuesday but it recovered yesterday after government sources told Reuters some of the world's richest central banks would not stop investing in the currency.

Tamimi also said the UAE Central Bank currently holds foreign currencies such as the Japanese yen, but in very small amounts with all exposure hedged, while the bank's total balance sheet was an equivalent to $55bn.

"Our foreign exchange reserves are fully hedged against foreign exchange risk," he said.

"Even when, from time to time, the Central Bank invests in other main currencies for the sake of geographical diversification and for minimising a credit risk, all these investments are fully hedged against foreign exchange risk," he added. The Central Bank's foreign assets holdings stood at Dh78.3bn at March end, down from Dh89.9bn at the end of 2009.