Dollar losing grip in parts of Middle East
Some Middle Eastern countries are reconsidering their ties to the U.S. dollar after it hit record lows against the euro. But Jill Barshay reports why bigger Gulf states will likely stick to the currency.
Traders at the Kuwait Stock Exchange (Yasser Al-Zayyat/AFP/Getty Images)
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Lisa Napoli: So much for the almighty dollar. Today, it got hammered against the yen. For the first time in a dozen years, the greenback dipped below a hundred yen. It wound up bouncing back in trading. But meanwhile, the dollar hit record lows against the Euro and Swiss Franc, too. Suddenly the buck is seeming tainted in places like the Middle East. Marketplace's Jill Barshay says some countries are even rethinking their ties to it.
Jill Barshay: Kuwait was the first Gulf state to stop pegging its currency to the dollar last May. The United Arab Emirates is thinking about it. So is Qatar.
Paul Lennox of Custom House Currency Exchange tracks foreign currencies. He says the weak U.S. dollar is causing problems for the Gulf states. Inflation's running at 13 percent a year in Qatar.
Paul Lennox: As the U.S. dollar falls, then the Gulf currencies also fall relative to the euro. And so if the Gulf states are importing goods, services, what have you, from Europe, the price of those imports are going up in their currency.
Of course, the most important commodity in the region is oil, and it's priced in dollars. Lennox says that's why Saudi Arabia and the bigger Gulf States are likely to keep their currencies married to the dollar. They're making a lot more in oil revenues than they're losing in inflation, he says.
I'm Jill Barshay for Marketplace.
