Arab Central Banks Move Assets Out of Dollar
By Philip Thornton
The Independent, London
Tuesday, March 14, 2006
http://news.independent.co.uk/business/news/article351127.ece [1]
Middle Eastern anger over the decision by the US to block a Dubai
company from buying five of its ports hit the dollar yesterday as a
number of central banks said they were considering switching
reserves into euros.
The United Arab Emirates, which includes Dubai, said it was looking
to move one tenth of its dollar reserves into euros, while the
governor of the Saudi Arabian central bank condemned the US move
as "discrimination".
Separately, Syria responded to US sanctions against two of its banks
by confirming plans to use euros instead of dollars for its external
transactions.
The remarks combined to knock the dollar, which fell against the
euro, pound, and yen yesterday as analysts warned other central
banks might follow suit.
Last week the US caused dismay after political opposition to the
takeover of P&O by Dubai Ports World forced DPW to agree to transfer
P&O's US port management business to a "US entity" .
The governor of the UAE central bank, Sultan Nasser al-Suweidi, said
the bank was looking to convert 10 percent of its reserves, which
stand at $23 billion (13.5 billion), from dollars to euros. "They
are contravening their own principles," he said. "Investors are
going to take this into consideration [and] will look at investment
opportunities through new binoculars."
Hamad Saud al-Sayyari, the governor of the Saudi Arabian monetary
authority, said: "Is it protection or discrimination? Is it okay for
US companies to buy everywhere but it is not okay for other
companies to buy the US?"
Syria has switched the state's foreign currency transactions to
euros from dollars, the head of the state-owned Commercial Bank of
Syria, Duraid Durgham, said.
Last week the White House told US financial institutions to
terminate all correspondent accounts involving the Commercial Bank
of Syria because of money-laundering concerns. Mohammad al-Hussein,
Syria's finance minister, said: "Syria affirms that this decision
and its timing are fundamentally political."
The euro rose a quarter of one percentage point against the dollar
to a one-week high of $1.1945, although it retreated in later
trading.
Monica Fan, at RBC Capital Markets, said: "The issue is whether we
will see similar attitudes taken by other Middle Eastern banks. It
is a question of momentum."
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