A member of the United Arab Emirates Federal National Council (FNC), which advises the government, said on Thursday the Gulf state's dollar peg was stoking inflation and fuelling discontent.

Aamer al-Fahim, one of eight members from Abu Dhabi among the FNC's 40 members, said the UAE government should explain to the public why it remains committed to the dollar peg and clarify its course on currency policy.

'We need the government to be transparent in this matter as we do not want our market to be unstable,' Fahim told Reuters by telephone. Fahim is also a director of the Abu Dhabi-based family business, the Alfahim Group.

'Inflation has affected many expatriates, consumers and traders,' he said. 'There have been cases of violence and this affects our security.'

The dollar has lost 6.6 percent of its value against the euro this year alone, making some imports to the Gulf states that peg  the dollar more expensive and remittances to some countries less lucrative.

UAE Minister of State for Finance Ubaid al-Tayer will answer a question from Fahim on the dollar peg before a meeting of the 40-member FNC next week, the body's secretary-general said on Tuesday.

The dollar peg forces the UAE, and most of its neighbours in the Gulf Arab region, to track US interest rate cuts as the United States tries to ward off recession, while Gulf economies surge on a five-fold rise in oil prices since 2002.

'Interest rates are one of the best tools to control inflation but the dirham's peg to the dollar does not allow the UAE to control inflation,' Fahim said.

UAE Prime Minister Sheikh Mohammed bin Rashid al-Maktoum said on Tuesday a committee was studying the country's peg to the dollar, though it would be retained for now.

The FNC, which has no legislative powers, is not involved in the committee and has no plan to discuss currency reform, FNC secretary-general Mohammed al-Mazrooei said on Tuesday.

Foreigners, from labourers to bank executives, comprise more than 85 percent of the UAE population of about 4.5 million. Relatively cheap manual labour from India and other countries has underpinned the country's construction boom. -Reuters