Gulf Arab States Should Scrap Dollar Currency Pegs, Faber Says
By Arif Sharif
March 16 (Bloomberg) -- Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom report, said Persian Gulf economies should revalue their currencies after the dollar slumped to record lows.
Saudi Arabia, the United Arab Emirates and three other Gulf states should link their currencies ``to a basket, and not the weakest currency in the world,'' Faber told a Middle East investment conference in Abu Dhabi today. ``They should have de- pegged their currencies a long time ago,'' he said.
Faber, who advised investors to buy gold at the start of its six-year rally, this month said Federal Reserve moves to cut interest rates to avert a U.S. economic slowdown will ``destroy the U.S. dollar.''
The dollar sank below 99 yen, the weakest in 12 years, last week and slumped to a record low versus the euro after JPMorgan Chase & Co. and the Fed bailed out Bear Stearns Cos., as credit market losses widen.
The U.S. currency also plunged to less than one Swiss franc for the first time as traders speculated the Fed will slash interest rates as much as 1 percentage point on March 18 to avert a recession.
Gulf countries are under pressure to revalue their currencies, or drop their dollar pegs, after the U.S. currency fell 10 percent against the euro last year and the Fed started cutting rates. The weaker dollar has made imports from Europe more expensive, stoking record inflation across the region.
``I am a great believer in flexible exchange rates and a strong currency is a sign of a strong economy,'' said Faber, whose Hong Kong-based Marc Faber Ltd. manages $300 million.
The U.A.E. will keep the dirham pegged to the dollar until at least the end of this year, Central Bank Governor Sultan Bin Nasser al-Suwaidi said Jan. 3. There is ``no reason'' to revalue it, he said.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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