Saudi Central Bank Chief Backs Dollar, Cites Its ‘Convenience’ By Camilla Hall Oct. 7 (Bloomberg) -- Saudi Arabia’s central bank chief denied holding talks on dropping the dollar as the currency for pricing oil, and said his country’s foreign-exchange peg to the dollar is a matter of national economic interest. “We don’t have any emotional or political attachment to the dollar, we have self-interest and it still serves our self- interests,” Saudi Arabian central bank GovernorMuhammad al- Jasser said in an interview yesterday in Istanbul, where he’s attending annual International Monetary Fund and World Bank meetings. Speaking to reporters earlier, he said the U.K.’s Independent newspaper was “absolutely incorrect” in reporting that Gulf oil producers and nations including China, Japan, Russia and Brazil had held secret talks on a nine-year plan to phase out the dollar in oil trade. There has been “absolutely nothing” of that nature discussed between Saudi Arabia, the world’s biggest oil exporter, and other countries, he said. The newspaper report, coming days after IMF figures showed a drop in the dollar’s share of global foreign-exchange reserves, sent the U.S. currency tumbling versus the euro and yen. Jasser’s remarks indicate the largest Arabian economy doesn’t favor a diminished role for the dollar. The Independent said talks have been held on a move toward pricing oil in a basket of currencies plus gold, citing unidentified Gulf officials and unidentified Chinese bankers. Reaching Consensus “The political consensus needed to achieve this would be very difficult, especially at a time when there is an apparent lack of consensus on more proximate issues for GCC countries, such as the Gulf Monetary Union,” Adarsh Sinha, a Barclays Capital currency strategist in London, said in an e-mailed note. Jasser indicated the Gulf Cooperation Council nations have yet to decide on an exchange-rate policy for a common currency, a goal the group agreed to in 2001. “Everything will be on the table” for what’s the most appropriate exchange-rate regime, he said in the interview yesterday. Saudi Arabia “hasn’t lost hope” that Oman and the United Arab Emirates would agree to re-join a planned Gulf monetary union, Jasser said Sept. 1. Saudi Arabia, Kuwait, Qatar and Bahrain are still part of the project, which might allow Gulf states to pursue a monetary policy independent of the U.S. All of the group’s currencies are pegged to the dollar except for Kuwait’s. Losses Pared The dollar dropped 0.4 percent to $1.4708 per euro at 4:23 p.m. in New York, after earlier losing as much as 0.8 percent. It was also down 0.8 percent versus the yen, after dropping 1 percent earlier. Criticism of the dollar’s role as the world’s main reserve currency has grown in the wake of the global financial crisis. China and Russia in June agreed to expand use of each other’s currencies in trade to reduce dependence on the dollar, and those countries plus Brazil and India -- the so-called BRIC nations -- have discussed buying each other’s bonds and swapping currencies. The dollar fell to a one-year low of $1.4844 per euro on Sept. 23. Saudi Arabia, a U.S. political ally in the Middle East, has resisted calls for a move away from the dollar in oil pricing as the American currency lost value in recent years. Iran and Venezuela raised the proposal at a meeting of the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, in November 2007. The weaker dollar adds to costs for OPEC members who use oil revenue to buy goods priced in other currencies. Japan, Russia Other countries cited by the Independent as being involved in the secret plan also denied it. Japanese Finance Minister Hirohisa Fujii said at a news conference in Tokyo yesterday that he “doesn’t know anything about it,” when he was asked about the newspaper report. Russia’s Finance Ministry isn’t holding talks on replacing the dollar for oil sales, Interfax news agency reported, citing Deputy Finance Minister Dmitry Pankin. Kuwaiti Oil Minister Sheikh Ahmed Al-Abdullah Al-Sabah told reporters yesterday in Kuwait City that Gulf Arab states have no plans to drop the dollar for oil pricing. The Wall Street Journal separately reported that Jasser is negotiating a contribution to the IMF, partly to shield against an erosion of its ownership share of the Washington-based lender that has offered financial aid to countries from Iceland to Pakistan. The Journal cited an unnamed person familiar with the talks saying the contribution is likely to be about $10 billion. To contact the reporter on this story: Camilla Hall in Dubai atchall24@bloomberg.net
Wednesday, 7 October 2009
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