Gulf attitude to US govt debt 'unchanged'
Abu Dhabi, June 1, 2011
Gulf central banks still regard US Treasuries as a safe investment and the UAE may consider diversifying reserves to include China's yuan, the UAE central bank governor said on Wednesday.
Gulf states, which mostly peg their currencies to the US dollar, are major holders of Treasuries and other US assets, with oil - priced in dollars - their major source of revenue.
Asked whether the UAE was considering changing its policy on buying US government bonds after a bill to increase the United States' debt issuance limit was defeated in Congress, Sultan Nasser al-Suweidi said: 'No, there is no change.'
'For the time being, I do not think there is a strong move in GCC countries following Asian central bank investment policies,' Suweidi told reporters on the sidelines of a financial workshop in the UAE capital.
The UAE central bank re-started purchases of foreign securities in May 2010, after reducing its holdings to almost zero following the 2008 global financial crisis. It held Dh80 billion ($22 billion) worth of foreign paper in March, almost 44 per cent of its total reserves, slightly down from Dh82.1 billion in February, data show.
'It is a treasury department policy. There are guidelines that are reviewed from time to time. If there is a need to move into Treasuries in a bigger way that would be discussed and decided,' Suweidi said.
US lawmakers defeated on Tuesday a bill to raise the $14.3 trillion debt limit without conditions. So far, markets are little concerned by the possibility of default on what is viewed as one of the world's safest investments.
Asian central banks have stepped up purchases of dollar-based foreign reserves to combat currency appreciation and keep exports competitive.
Asked if the UAE, the world's No.3 oil exporter, might consider diversifying reserves into the Chinese yuan, Suweidi said it depended on China relaxing its currency controls.
'It depends on the Chinese themselves because they are not yet prepared to allow the yuan to be a reserve currency,' he said. 'If China relaxed controls then that will go to the investment committee within the treasury department of the central bank and then they will make a decision.'
The UAE is in the final stages of approving a law that will allow the Gulf state to issue its first ever federal sovereign bonds and create a local debt market.-Reuters
More Finance & Capital Market Stories
- Egypt regulator sets rules for index
- Dubai Islamic eyes Kenya, Indonesia for expansion
- ADCB to buy back 3pc of its shares
- GCC insurance growth outpaces developed markets
- Bahrain 'faces budget deficit, inflation challenges'
- Global Payment Services wins key certification
- BBK unveils big India expansion plans
- Kuwait GDP growth to hit 3.5pc in 2014
- Gulf shares tumble over EM exposure cut
- GCC bonds to gain from macro-economic climate
- French Business Council Dubai members up 18pc
- Egypt economy growth seen less strong than thought
- Sharjah approves $4.2bn budget for 2014
- Saudi non-oil sector posts solid growth in Feb
- Seera total income rises to $34m
- NBAD approves 40pc cash dividends
- NBAD sees 8-10pc loan growth
- Al Basel Group launches investment arm
- Union Insurance posts $18m profit
- Oman warns banks on conflicts of interest
- Japan to lend Tunisia $480m
- 400 to join anti-laundering seminar in Riyadh
- Lebanese insurer to head Prague Club
- UAE's first REIT plans $135m IPO
- Bahrain banking industry outlook 'positive'
- New India Assurance opens Bahrain branch
- Qatar sets up mixed business incubator
- Kuwait budget spending up 8pc in April-Jan
- Thomson Reuters to host Mena IFR awards
- ADIB offers smartphone industry investment