The UAE has lowered its overnight repurchase rate to 1.5 percent from 2.0 percent and cut the borrowing rate on its emergency facility, making it much cheaper for banks to borrow the money.

"It is good the (UAE) central bank realized its rate under the emergency facility was on the high side and reduced it," said the head of Treasury at an Abu Dhabi-based bank.

"The new rates are reasonable and lot of banks will make use of the facility if they need the funds."    

Some analysts said Saudi Arabia might respond with a cut in its repo rate by as much as 100 basis points in coming days.