The United Arab Emirates, the second-biggest Arab economy, said the dirham’s peg to the U.S. dollar is “steady and consistent” even as U.S. lawmakers remained deadlocked over the country’s debt limit.
“No fear on the U.S. dollar, although it is exposed to price fluctuations as it happens with all the major currencies,” the Abu Dhabi-based central bank said in an e-mailed statement today. “Despite the fact that the central bank foreign reserves are mostly denominated in U.S. dollars, they are invested mostly in non-U.S. assets.”
The central bank doesn’t hold U.S. Treasury bonds “or any other financial instruments issued by the U.S. government due to the very low return on holding these instruments,” it said.
The U.A.E. and Saudi Arabia are among five members of the Gulf Cooperation Council that keep their currencies pegged to the dollar. Kuwait links its dinar to a currency basket.
The Republican-led U.S. House of Representatives remains on a collision course with the Senate and the White House over competing plans to increase the country’s debt limit. President Barack Obama has threatened a veto of House Speaker John Boehner’s two-step plan to raise the debt ceiling.
Standard & Poor’s, which has given the U.S. a top ranking since 1941, reiterated July 21 that the chance of a downgrade is 50 percent in the next three months. The ratings firm said it may cut the nation as soon as August.