U.A.E. Dirham Climbs to 7-Year High on Revaluation Speculation

Sept. 25 (Bloomberg) -- The United Arab Emirates dirham, which is pegged to the dollar, rose to its highest in at least seven years on speculation the central bank will revalue the currency to protect itself against a weakening dollar.

The dirham, allowed to trade in a band around the central bank rate of 3.6725 to a dollar, climbed to an intra-day high of 3.6686 today, its highest since at least 2000, according to data compiled by Bloomberg. It was last trading at 3.6713.

``There has been speculation for the last several months of a revaluation but the U.A.E. central bank continues to say that nothing is going to happen,'' said John Eldredge, head of treasury at Emirates Bank International PJSC, the U.A.E.'s second-biggest bank by assets. ``I don't think the U.A.E. will do anything without Saudi Arabia.''

The dollar fell to a record low $1.4130 against the euro yesterday following the Federal Reserve Sept. 18 rate reduction and the fallout from losses in the U.S. subprime mortgage market, sparking speculation the United Arab Emirates and Saudi Arabia may revalue their currencies against the dollar.

Kuwait dropped its currency's peg to the dollar on May 20 in favor of linking it to a basket of currencies, including the euro, the British pound and the yen, citing inflation concerns.