"ITISALAT" defer a decision to gain a full communications Pakistani

Said Mohammed Hassan Omran, chairman of "contacts" that the company would take a decision on the purchase of the dominant share of the Pakistan Telecommunications Company end of 2008.

The "Meade" that the company rejected the Pakistani offer "contacts" bought 25% of the share which prevents double the share of "contacts" in the Pakistani company to 51%.

Purchased "contacts" 26% of the company's shares in 2005 b 2,59 million States.

Finance Minister announced the German Beer Saturday Steinbrook support for the European Central Bank to manage the financial crisis and he distanced himself from criticisms voiced by French President Nicolas Sarkozy in this regard.


Steinbrook said to reporters about the French president's statements on the sidelines of a meeting of European Finance Ministers in Porto, "I think that the policy of the European Central Bank appropriate."

He added that the "work of the European Central Bank greatly welcome here" in Porto, "I joined this positive assessment," adding that the European monetary institution was right in the banking system supplying additional liquidity to ensure functioning well.

German minister urged not to allow questioning the independence of the European Central Bank set out in the European treaties, which adheres Germany in particular.

Swiss bankers deny the existence of Arab funds «forgotten» The Swiss Bankers free banks from any funds for officials or wealthy Arabs died owners, or frozen funds, or were killed during the wars that have plagued the region during the past decades, in response to some press reports about Arab money «lost» or «forgotten» in Swiss banks. The Executive Chairman said the Bank «Levis Mirabaud» Swiss Giles Roulette in an interview to «life»: «I am sure that no Arab money lost in Benocna

UAE: Bankers excluded editor Dram momentum despite speculation on the currency

Bankers ruled yesterday that the Jordanian Central Bank UAE to liberalize the exchange rate of the national currency, despite the registration currency market speculation strong Dram amid increasing speculation imminent implementation of this step with the direction the Federal Reserve to reduce interest rates this month. He told «Middle East» Jean Christophe turnover, the Regional Director in the Gulf region for the Bank «BNP Paribas» French «when people start talking about this change in the currency exchange rate must exist momentum in this direction».
He said at a meeting in Dubai that the dollar weak, the more inflationary pressures but moving currency exchange rates «is a political decision ultimately». The turnover that postponing plans to launch the Gulf common currency is «resolution Saeb», adding that «this part of the world are well integrated with the world economy and two-thirds of reserves (cash) is one of the same coin». The central banks in the Gulf states, agreed last Saturday to develop individual policies for dealing with inflation increasing, but did not decide any change to the policy of linking the dollar currencies. Increased exchange rate Dram Emirates yesterday to its highest level since June 26 (July) because of past activities of speculators in the currency as record demand for the dollar exchange rate 3.6718 dirhams. The market expects that reduces the American reserve interest rates during its meeting scheduled next Tuesday, and any reduction of the interest that puts pressure on the most central banks since the Gulf do the same, which would increase inflationary pressures on their economies, which are suffering from high levels of inflation. For his part, told «Middle East» on Shihabi CEO of the investment bank capitalization in Dubai «I do not believe that the devaluation of the benefits to the economy, but the consequences would be extremely complicated». He said in a dialogue via telephone «should not rush things to address the short-term problem such as inflation». The economic stability enjoyed by the UAE and the countries in the region could be affected if the floating currency rates. The governor Sultan Nasser Swedish UAE Central Bank abstained last Saturday when asked to comment on the price change was studying the measurement of UAE dirhams. The fixed exchange rate Dram at 3.67275 against the dollar since November (November) 1997, with record inflation in the Emirates, 9.3% in 2006 result of the decline in the dollar exchange rate basically. He pledged the central bank in the UAE inappropriate, to continue linking the currency to the United States dollar commitment to the Gulf leaders to maintain the linked exchange rate fixed at the dollar.

Headed Emirates to convert part of the dollar reserves to the euro since last year when he said that the Central Bank intends to transfer 10% of these reserves to euros. In the Emirates started to rise in the cost of living since the banner year 2003 with the start of the march retreat dollar exchange rate against the euro reflected on the cost of imports to the United Arab Emirates.

The prices of some consumer goods imported specifically considerably. Also indicate the movement of the various components within the consumer price index to external influence on prices in the UAE.

Economists say that the devaluation of the dollar mean, in fact, a similar decline in the purchasing value of oil revenues in Gulf set up or converted to other global currencies. In their opinion, that oil revenues accounted for the bulk of government revenues in the Gulf region and the purchasing value of this revenue depends on the chances of the American currency on the basis of which are pricing crude oil sales. My residents of the Gulf citizens and foreigners alike impact on the American currency lower living costs, which rose rapidly record for the past four years or Thursday. According to bankers that inflation rates in most countries in the region recorded unprecedented levels affected mainly high housing prices and real estate prices, high dollar-denominated imports. But Gulf states are linking their currencies to the dollar to help stabilize the export earnings.

Saudi Monetary Institution again refers to the difficulty of adopting unified Gulf currency in 2010

AL Sayary said on the sidelines of a meeting of IMF governors institutions and central banks in the Gulf Cooperation Council that the "exceptional economic developments taking place in the Gulf States at the present time makes fulfill the timetable for the issuance of the previous Gulf unified currency on schedule in 2010 difficult."

However, the AL Sayary emphasized that a decision to postpone the adoption of unified Gulf currency and financial institutions in the GCC countries are still striving to achieve this goal on schedule.

He said in this context, "In spite of these difficulties, there was agreement among all the Gulf Cooperation Council states on the importance of issuing currency in the Gulf time (..) and the technical committees continued to work in accordance with the schedule previously."

He considered that "it is premature to talk about postponing the date of issuance of currency AAA Standard."

The AL Sayary said during a conference held in the Gulf banks in May in Kuwait that the timetable for the adoption of monetary union and common currency "narrow and needs to extraordinary efforts to achieve it."

The Gulf leaders had taken a decision to adopt the single currency in 2010 and identified a number of financial criteria necessary They also decided to link all Gulf currencies, the dollar prelude.

However, the project shaken when the Sultanate of Oman announced that it will not be able to ride the train unified currency in 2010 to go back and say at a later stage it may abandon completely the idea of joining the project.

Increased speculation about the inability of the Gulf Cooperation Council states to adopt the common currency according to schedule after the announcement of Kuwait last May disengagement dinar dollar linked to a basket of currencies, although they stressed that the disengagement dinar dollar does not mean the withdrawal of the draft unified currency.

Emirates Airlines plans to double Talpitha Airbus planes "Any 380"

Said Tim Clark told reporters, "I want to double" the number of aircraft to be purchased from the European manufacturing company.

He added occasion trip devoted to reporters in a plane + Boeing 777-200 of TR + received Airline "Emirates" just "But 55 is the largest number that we received at the present time."

Added Clark told Agence France Presse that the Emirates Airline may buy "more" of the aircraft "no 380," saying that the international airport in Dubai, the largest in the Middle East "can not receive more of them" at the present time.

He believed that the opening of a second airport being built in the Principality experiencing real big leap utility Emirates airline company at the height of their expansion and thus will be able to possess the largest number of aircraft.

The Emirates Airline owned by the Principality of Dubai, one of the seven Emirates that make up the United Arab Emirates is the largest customer for Airbus aircraft giant "no 380." The fleet consists of Boeing and Airbus aircraft.

It is expected to receive the first model of the 55 aircraft requested purchased in the first quarter of 2008.

The airline Emirates fleet, which is currently 108 aircraft received Wednesday aircraft, "Boeing 777-200 of TR" is the first under the Order to buy ten planes of the same type had been signed in 2005 with the American Manufacturing Company.

The plane will conduct new journey directly as of the first of October between Dubai and Sao Paulo, Brazil thereby achieving the first flight without interruption between the Middle East and Latin America.

Middle East survives credit crunch

zoom

Abdel-Wadood: there has been a slight loss of risk appetite in some local banks.

The tightening in global credit markets last month has had some negative effects for Middle East borrowers, but has created opportunities for many of the region's private equity firms.

Stock markets in Europe, the US and the Far East were hit as many banks revealed the extent of their exposure to sub-prime loans.

Dubai Financial Market and the Abu Dhabi Securities Market were the only GCC stock exchanges to lose substantial value in the ensuing sell-off, as some international investors moved their money out of markets perceived to carry a higher risk.

Dollar Drops After Soft Jobs Data, ISM Services

NEW YORK (MarketWatch) -- The dollar fell against other major currencies Friday after a government report showed the U.S. economy created fewer jobs last month than expected.

Nonfarm payrolls grew by a lower-than-expected 92,000 in July, the least seen since February, the Labor Department said. The nation's unemployment rate rose to 4.6%, up from 4.5% in June and the highest reading since January.

Economists had been expecting payroll growth of about 133,000, according to a survey conducted by MarketWatch. The jobless rate was expected to remain at 4.5%.

"The market reaction has so far been minimally dollar negative, as would be expected with a lower nonfarm payrolls reading," said Brian Dolan, chief currency analyst at Forex.com, a division of Gain Capital. "But given all the focus on the equity markets, it's probably more important how the equity market reacts."

In New York trading, the dollar was quoted at 118.59 yen, compared with 119.23 yen late Thursday. The euro stood at $1.3740, compared with $1.3701.

The British pound traded at $2.0379, compared with $2.0355. The dollar fetched 1.1980 Swiss francs, vs. 1.2044 francs

The euro was at 162.98 yen, compared with 163.12 yen.

U.S. stock losses mounted Friday after the latest employment report showed weaker-than-expected jobs growth and higher unemployment last month.

Kathy Lien, chief strategist at DailyFX.com, said the weaker jobs report "should push the Fed to seriously consider what the market has already decided for them, which is to lower rates at the end of the year."

"There were plenty of signs that payrolls were going to be weak," she said. "August will only be a tougher month given the tightening of credit and the blowup in the subprime sector."

"There is never just one cockroach in the closet, so we expect more hedge funds and home lenders to report major losses which cannot be positive for the labor market going forward," she said. "Today's news should be negative for both the U.S. dollar and the U.S. stock market."

Adding to the dollar's woes was a report showed nonmanufacturing sectors of the U.S. economy expanded at a slower pace during July.

The Institute for Supply Management said Friday that its nonmanufacturing index fell to 55.8% from 60.7% in June. Economists were looking the index to decline to 58.8%.

Source ; forex.com

Euro Rises To More Than Two-year High Vs. Dollar On Rate Outlook

The euro rallied to a more than two-year high against the dollar Thursday, after the head of the European Central Bank signaled that interest rates in the euro zone will rise in the coming months.

The dollar fell across-the-board on concerns over uncertainties in U.S. economic growth and as traders positioned themselves ahead of the upcoming meeting of Group of Seven finance ministers in Washington over the weekend.
"The combination of robust [eurozone] growth and rising interest rates is fuelling the single currency," said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. Meanwhile, "the dollar's shaky foundation goes from bad to worse" as the currency "remains overshadowed by the risk of further slowing at home and robust abroad."

In New York trading, the dollar was quoted at 119.01 yen, compared with 119.31 yen late Wednesday. The euro stood at $1.3476, compared with $1.3429. In intraday trading, it had risen to $1.3503, the highest level since January 2005.

The British pound traded at $1.9775 vs. $1.9754. The dollar changed hands at 1.2169 Swiss francs, compared with 1.2205 francs.

The euro fetched 160.42 yen, compared with 160.28 yen, after rising to a new record high of 160.85 yen.

The Dollar Index, which tracks the dollar against a basket of the world's major currencies, fell to its lowest level since March 2005.

The Frankfurt-based ECB on Thursday held rates at 3.75%, as expected, after a quarter-percentage-point hike in March. The ECB sets interest rate policy for the 13 countries that use the euro as their currency, from Germany to Slovenia. The central bank has gradually lifted rates from a low of 2% in December 2005 as the European economy has improved.

'Very closely'

At a post-meeting press conference, Jean-Claude Trichet said the bank will continue to monitor inflation risks "very closely," and that wage increases remain a significant risk to price stability.

The euro briefly came under a bit pressure as Trichet held back from using the phrase "strong vigilance," which would have likely indicated a further hike in May. Instead Trichet said monetary policy continues to be "on the accommodative side."

Trichet's comments are "mostly less-hawkish, but this is not very much out of line with expectations" said Brian Dolan, director of research at Forex.com, a division of Gain Capital. His language "tends to indicate no rate hikes are planned in the immediate future, probably two months out at the minimum," he said.

Kathy Lien, chief strategist at DailyFX.com, said while Trichet's comments raised doubt for a hike next month, the European Central Bank "is still on track to raise rates one more time this year."

CMC Market's Laidi viewed Trichet's decision to leave out "vigilance" as " tactical" due to the strength in the euro.

"Using the term 'vigilance' would have been received as a guarantee of a May rate hike, thus risking further elevating the euro from its current two-year highs," he said. "Today's change of rhetorical tack does not preclude a [second- quarter] rate hike, it only means the ECB is being cautious with the rising value of its currency."

U.S. data

Initial jobless claims rose by 19,000 in the week ending April 7 to 342,000, the highest in eight weeks, the Labor Department reported Thursday.

The more-reliable four-week average of new claims - which smoothes out distortions from events such as weather or holidays -- rose by 7,000 to 323,250, the highest in three weeks.

In a separate report, the Labor Department said prices of imported goods rose by 1.7% in March, the biggest gain in 10 months and much higher than the 0.6% gain expected by economists.

The market remained cautious ahead of the upcoming meetings of Group of Seven industrial nations and the IMF in Washington D.C. this weekend.

"Evidence that Japanese investors have begun redeploying funds overseas, coupled with what seems to be a more relaxed official attitude about the yen's weakness ahead of the G7/IMF meetings continues to weigh on the yen," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"The comments before the meetings at the end of the week, concerns about yen weakness and yen-carry trades, which had been a cause of so much anxiety in Feb, when the yen was actually a bit stronger than it is today, is noticeably absent, " he said, in a note.

The yen received a boost after Trichet said that the Japanese economy is recovering and that the yen should reflect fundamentals.

Elsewhere, China reported its foreign-exchange reserves rose $136 billion in the first-quarter to $1.2 trillion, driven by a significant trade surplus and capital inflows. China has the largest currency reserves in the world

Source : Forex.com

Dollar Cuts Losses After Hitting Record Low vs Euro

NEW YORK (Reuters) - The dollar slumped to a record low against the euro on Friday after a soft reading on U.S. growth but later pared losses on a report showing consumer confidence was better-than-expected in April.

The consumer confidence survey for April lent support to the dollar after the currency fell sharply on news the economy grew just 1.3 percent in the first quarter, although the market's bias overall was still to sell the dollar.

"The fact that the consumer sentiment report came in a little better than expected takes the heat off the dollar for the moment," said Brian Dolan, director of FX research at Forex.com in Bedminster, New Jersey.

"But it's still a position-driven market. The dollar is heavy but it's not making any gains and it comes down to whether or not we see some short-covering into the end of the week," he added.

A survey showed on Friday that U.S. consumer sentiment fell in April to its lowest in seven months but was better than first estimated for the month and above market expectations. Consumer sentiment was helped by the recent rally in the stock market.

The dollar edged higher after the report, pushing the euro to $1.3654 from $1.3670 previously. Earlier, the euro hit a lifetime peak of $1.3683, according to electronic trading platform EBS, after the softer-than-expected U.S. gross domestic product data.

The euro last traded at $1.3661, up 0.5 percent on the day.

Against the yen, the dollar trimmed losses to 119.42 yen but was still down 0.1 percent from late Thursday.

Source : Forex.com

Dollar Drops After Jobs Report

NEW YORK (MarketWatch) -- The dollar edged lower against the euro and the yen early Friday after a government report showed the U.S. economy created fewer-than-expected jobs last month.

The Labor Department said nonfarm payrolls expanded by 88,000 in April, lower than the 100,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.5% from 4.4%, in line with expectations. Average hourly earnings increased 4 cents, or 0.2% to $17.25, vs. expectations of a 0.3% gain.

"The dollar slipped following the slightly softer than expected non-farm payroll print, though losses so far have been limited, and fleeting," said analysts at research firm Action Economics. "The data were not soft enough to alter the near term U.S. outlook, and given the market is still seen as short of dollars overall, position squaring could continue to support the greenback into the weekend."

"We're still holding above key short-term dollar support," said Brian Dolan, director of research at Forex.com, a division of Gain Capital. "Don't expect any movements of significance" until the euro breaks 1.3590 on the upside or 1.3520 on the downside, he said.

In early New York trading, the euro stood at $1.3584 compared with $1.3551 late Thursday. The dollar was quoted at 120.04 yen, compared with 120.37 yen.

The British pound traded at $1.9909 vs. $1.9878. The dollar also changed hands at 1.2127 Swiss francs, compared with 1.2161 francs.

The euro fetched 163.06 yen, compared with 163.16 yen.

April's employment report is the last key economic release before the Federal Open Market Committee's interest-rate meeting next Wednesday. Economists do not believe the data will move the Federal Reserve off the sidelines.

The Fed is expected to hold rates steady at 5.25%, where rates have been since last summer, given uncertainties about whether the economy will slow enough to gradually bring down inflation. Consumer prices have remained stubbornly above the central bank's perceived comfort zone despite average growth just above 2% over the past year.

Australian dollar loses

In other trading, the Australian dollar dropped sharply after the Reserve Bank of Australian lowered its near-term inflation forecasts in its quarterly statement on monetary policy.

"In recent months the decline [in inflation] appears to have been a little faster than originally expected, and it now seems likely that underlying inflation will be about 2.5 per cent, or possibly a little lower, during 2007. Inflation as measured on a year-ended basis by the [consumer price index] will fall below 2 per cent over the next couple of quarters," the bank said in a statement.

The central bank, however, warned that in the longer-term, "it seems unlikely that inflation will continue to decline."

A report showing a much larger-than-expected Australian trade deficit for March also weighed on the currency.

Dollar Bounces Back From Record Low Against Euro

New York -- The dollar rose from a record low against the euro last week as private reports showing resilience in U.S. manufacturing and services industries reduced concern over a slowdown in the world's largest economy.

The U.S. currency also touched a two-month high against the yen last week as April data showed manufacturing was the strongest in almost a year and services including banking and retailing grew the fastest in three months.

The gain may fizzle, however, on bets that the European Central Bank will signal further increases in borrowing costs while the Federal Reserve holds its benchmark rate steady at policy meetings this week.

"The dollar was on a winning note" as the data "removed some of the pessimism over the near-term U.S. outlook," said Brian Dolan, research director at Forex.com, a unit of the online currency trader Gain Capital. "Next week should see the dollar resume weakening as the interest rate outlook still favors the euro against the dollar. The long-term trend of a lower dollar remains intact."
The euro fell to $1.3555 last week, slipping from a record high of $1.3681 on April 27 and snapping a five-week winning streak. The dollar also advanced to ¥119.98 from ¥118.71 over the same period.

The Australian dollar was the biggest loser against the dollar among 16 major currencies this week, falling 1 percent to 82.15 U.S. cents after the country's central bank cut its inflation forecast, weakening the case for increased borrowing costs.

The U.S. currency pared its gains last week as slowing growth in the jobs market led investors to raise bets of an interest rate cut by the U.S. central bank.

"The dollar's recovery was cut short by the weaker-than-expected U.S. employment data," said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman. "The main force that has weighed on the dollar will likely continue to exert its pull."

The U.S. unemployment rate rose to 4.5 percent from the five-year low of 4.4 percent as employers added 88,000 nonfarm jobs in April, following a revised 177,000 the previous month, the Labor Department reported Friday in Washington. The median forecast of 85 economists surveyed by Bloomberg News was for a gain of 100,000.

The Institute for Supply Management, based in Tempe, Arizona, said this week its April manufacturing index rose last month to 54.7, the highest since May 2006, from 50.9 the previous month, while its index of non-manufacturing businesses rose last month to 56, the highest since January, from 52.4 in March. A level above 50 indicates expansion.

The Fed has kept its target rate for overnight lending between banks at 5.25 percent since lifting it to that level in June. The European Central Bank has raised its rate seven times since November 2005 to 3.75 percent. The Bank of England's rate is 5.25 percent. Policy makers of all three central banks are scheduled to meet to set rates next week.

"Growth and interest rate expectations are conspiring against the dollar," said Michael Woolfolk, senior currency strategist at Bank of New York. "A lower dollar is still the trend."

The dollar has lost almost 3 percent against the euro and about 1.7 percent versus the pound since the start of the year.

The Fed's trade-weighted major currency dollar index dropped to 78.91 on April 30, the lowest in its 36-year history.

The yield advantage of two-year U.S. Treasury notes over similar-maturity German bunds dropped to 0.465 percentage point on May 2, the narrowest since November 2004. A narrowing yield gap dims the allure of dollar-denominated assets.

Yields on interest rate futures fell following the payroll report, indicating traders raised bets the Fed will lower borrowing costs this year.

The yield on Eurodollar futures for December declined to 5.08 percent Friday from an almost three-week high of 5.105 percent a day earlier. The contracts' value at settlement is based on the interest rate on three-month bank deposits, which is influenced by the federal funds rate target.

"We have an ECB that remains hawkish," said Simon Derrick, chief currency strategist in London at Bank of New York.

UBS raised its forecast Friday for the euro to $1.40 by year-end, saying it expects the ECB to increase its benchmark rate to 4.75 percent by mid-2008.

The 13-nation currency rose to an all-time high of ¥163.60 on May 3 on bets the ECB will outpace the Bank of Japan in raising borrowing costs, enhancing the appeal of euro-denominated assets. The BOJ's rate is 0.5 percent, the lowest among major economies. Before this week the euro posted eight straight weekly gains against the yen.

Source : Forex.com

Dollar Jumps Vs Euro After ECB Does As Expected

The dollar rose against the euro early Thursday in New York after the European Central Bank left its key lending rate unchanged and signaled plans for a June rate hike, as expected.

After the ECB said it was leaving its official rate at 3.75% early Thursday, the bank's president, Jean Claude Trichet, told reporters that the bank would use "strong vigilance" in its efforts to ward off inflation. This has become a catchphrase of Trichet's to signal the bank will hike rates in the following month.

His remarks immediately gave the euro a knee-jerk boost, but it quickly shed those gains and the euro then moved weaker against the dollar.

Brian Dolan, head of currency research at Forex.com, said overall sentiment has been dollar-positive during the past week, and since the ECB's actions were already priced in, they were unable to give the euro sustained support.

"The euro's losses would have been even worse if Trichet hadn't signaled the June hike," Dolan said.

Early in New York Thursday, the euro was trading at $1.3508 from $1.3526 late Wednesday, while the dollar was at Y120.51 from Y120.05, according to EBS. The euro was at Y162.80 from Y162.38 late Wednesday. The dollar was at CHF1.2202 from CHF1.2185, while the U.K. pound gained against the dollar at $1.9836 from $1.9938 late Wednesday.

Source : Forex.com

Kuwait Unhooks Dinar and Dollar,

NEW YORK (MarketWatch) -- The Central Bank of Kuwait's decision over the weekend to untie its currency from the U.S. dollar might signal a growing trend among global central banks, especially those with large foreign-exchange reserves, to more actively manage their currencies.
And such a shift is likely to put the U.S. dollar under increasing pressure, analysts said.

Kuwait on Sunday, in a move to combat inflation, abandoned its dinar's peg to the U.S. dollar in favor of a basket of international currencies. The dinar had been pegged against the dollar since 2003. The central bank has not announced the composition of its currency basket. Kuwait also announced it would revalue the dinar by 0.37% against the dollar.

Weakness in the U.S. dollar has pushed up inflation and hurt the domestic economy, the central bank said.

"The significant drop in the exchange rate of the American dollar against most other major currencies had a negative impact on the Kuwaiti economy over the past two years," Sheikh Salem Abdel Aziz Al Sabah, governor of the central bank, told the official Kuwait news agency.

"In the Middle East, it's a story of dollar-concentration risk," said Stephen Roach, chief economist of Morgan Stanley. Kuwait's just-announced decision "may well be the first step in a regional diversification strategy that attempts to temper such risks," he said.

Oil producers in the Gulf not only price their one commodity -- oil -- in dollars, but their currencies for the most part are also dollar-pegged, Roach said.

"As a result, their foreign exchange reserves are massively overweight dollars," he said. "The region worries increasingly about excessive exposure to a chronically weak dollar scenario as an unavoidable outgrowth of a prolonged U.S. current account adjustment."

Growing speculation that the Federal Reserve will lower interest rates to spur the economy even as central banks elsewhere continue to tighten monetary policies pushed the dollar to an all-time low against the euro and a 26-year trough against the British pound last month.

Inflation in Kuwait stood at around 3% last year, consistently above the central bank's 2% target.

"Moreover, with the dollar's steady decline, the dinar has followed suit. This has made European imports more expensive, which is an important consideration for Kuwaitis," said Charmaine Buskas, economist at Moody's Economy.com.

"The Central Bank of Kuwait's decision shows a recognition that a dollar peg does not provide the flexibility small countries need in a global economy," she said.

Follow suit

The move by Kuwait sparked speculation other members of the Gulf Cooperation Council -- Saudi Arabia, U.A.E., Qatar, Oman and Bahrain -- will soon follow suit. However, these countries have promised to keep the dollar peg for now.

Some analysts say the U.A.E. and Qatar are the most likely candidate because both countries have by far the strongest price pressures in the Gulf region.

"With Kuwait's non-concerted move, the 2010 deadline for the launch of a single currency has become even more at risk," said Koceila Maames, Africa and Middle East economist at French bank Calyon. "What the other Gulf countries will do preliminary hinges on the fate of the ongoing monetary union process."

"If the next few weeks/months confirm further questioning of the monetary union project, the U.A.E. and Qatar will be the next candidates for revaluations, be it straight ones or through a peg to basket of currencies," the analyst said in a research note.

In the big picture, Moody's Buskas said the move by Kuwait suggested that "currencies pegged to the dollar will increasingly come under pressure as the dollar continues to adjust lower."

"Countries in the Middle East and throughout Asia will increasingly be forced to reconsider their pegs to the dollar," she said. "The trend to de-peg from the dollar and move to a basket will most likely affect other Asian countries, newly emboldened by China's recent decision to widen its yuan-dollar trading band to 0.5% from 0.3%."

This trend has been widely discussed "as a long-term dollar drag" and one likely to continue as central banks with large reserves "become more proactive in managing their currencies," she said.

Dollar negative

Kuwait's decision to drop its currency peg to the dollar had a muted impact on the currency market Monday.

"The market is temporarily distracted," said Brian Dolan, chief currency strategist at Forex.com, a division of Gain Capital. "Had a move like that come a month ago, you would have seen the dollar weaken much more significantly."

"It certainly represents further diversification away from the dollar," he said. "It'll reverberate once the dollar direction turns negative again."

The limited reaction in the market also reflected the fact that the dollar weighting in the dinar's basket peg will initially remain at a relatively high level, likely making up 75% to 80% of the new basket.

But the dollar's share will be reduced gradually, said analysts at BNP Paribas. Russia's move towards a currency basket, where the weighting of the euro is now dominant, can be used as an example, they said.

Global central banks' ongoing reserve diversification has been a main factor weighing on the U.S. currency and Treasury market in recent years. Many people argue because foreign central banks have played a vital role in financing U.S. borrowing by buying U.S. debt, a diminished appetite for dollar-denominated reserves could have a significantly negative impact on the dollar and the U.S. economy.

The news from Kuwait "cannot be seen as U.S.-dollar supportive," said Dennis Gartman of the Gartman Letter. "For if Kuwait, who owes the U.S. so much for having liberated it from Iraq's clutches in the war there during Bush senior's tenure in office, abandons the dollar, what then of the other currencies of the world still pegged to the dollar?"

Source : Forex.com

The Euro Scrapes Lows Against the Dollar as

NEW YORK -- The euro fell to its lowest level in more than five weeks against the dollar Monday after the yield differential between 10-year U.S. notes and similar-maturity German debt widened, enhancing the appeal of U.S. assets.

"We've had a sharp rally in U.S. yields favoring the dollar and prompting the market to consolidate the euro at slightly lower levels," said Brian Dolan, research director at Forex.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey.

The difference in yields between 10-year Treasury notes and comparable German bunds is 48 basis points. It reached 49 basis points on May 18, the highest since April 18. The spread has widened about 8 basis points since May 15.

"The euro-dollar was so grossly overbought that at this point the unwind is quite natural," said Boris Schlossberg, a strategist at DailyFX.com.

At 4 p.m., the euro fell to $1.3470 from $1.3512 late Friday.

In other currency trading, the dollar rose to ¥121.445 from ¥121.083 and the pound eased to $1.9709 from $1.9752. The dollar climbed to 1.2303 Swiss francs from 1.2271 francs.

The yen was lower as traders borrowed yen to buy other assets abroad.

"The carry trade continues unabated for the time being," said Schlossberg. "The market's risk appetite has almost turned into gluttony."

The yen fell against 14 of 16 most-active currencies after Asian stock markets reversed their declines and equity indexes in the United States gained.

Volatility on one-month yen options versus the dollar fell to 6.35 percent, from 6.5 percent Friday and 7.58 percent a month earlier. Lower volatility reduces the currency risk involved in carry trades.

In China, the yuan was little changed at 7.6661 versus the U.S. currency Monday. The People's Bank of China raised the one-year benchmark lending rate to 6.57 percent on Friday. China also widened the yuan's daily trading band against the dollar to 0.5 percent from 0.3 percent, which allows the currency to gain faster.

"The market shrugged the Chinese policies off," Dolan said, since they did not increase volatility.

The Swiss franc eased as investors bet that borrowing costs in Switzerland will rise at a slower pace than the key rate in the euro zone.

The franc and the Japanese yen are favorites among carry trade investors who borrow at relatively low interest rates to buy higher yielding assets.

"It looks like the franc is being penalized for having relatively low interest rates," said Paul Robson, a strategist at Royal Bank of Scotland. "The Swiss economy is robust and interest rates there will rise further. The problem is rates are rising elsewhere in Europe, and at a faster pace."

Source :Forex.com

Dollar Rises On Unexpectedly US Strong Home Sales

NEW YORK (Reuters) - The dollar rose on Thursday after a report showed U.S. new home sales in April rose by more than expected and at their fastest pace in 14 years, reinforcing the view the Federal Reserve may not have to cut interest rates this year.

The greenback surged against the euro and wiped out modest losses against the yen after the report.

Analysts said the data was further evidence that the U.S. housing sector is on the mend, and that a solid U.S. economy will likely allow the Fed to leave interest rates on hold at 5.25 percent for some time to come.

"While one month's data doesn't mean the housing market is out of the woods, this number certainly feeds into a further recalculation of the near-term US outlook, with dollar positive implications," said Brian Dolan, director of currency research at Forex.com in Bedminster, New Jersey.

The euro was trading down 0.28 percent at $1.3423, compared to $1.3445 ahead of the release of the data. The dollar was up 0.01 percent at 121.61 yen.

Eurodollar futures now perceive a chance of less than 50 percent that the Fed will lower interest rates from 5.25 percent by the end of 2007, in contrast to earlier this year when more than a quarter-point rate cut was fully priced in.

Source : forex.com