DAR AL ISLAM - JORDAN/KUWAIT: STOP PEGGING THE DINAR TO THE DOLLAR

Jordan Islamists demand an end to dinar-dollar pegging

Amman - An Islamic member of Jordan's parliamentary Economic Affairs Committee on Monday urged the government to follow Kuwait's steps in ending the 12-year-old peg between the national currency, the dinar, and the US dollar. "Jordan should follow Kuwait's steps in tying the dinar to a basket of currencies, because the drastic decline in the dollar's exchange rate is having negative repercussions on the Jordanian economy," Jaafer Hourani said.

"The decline of the dollar's exchange rate versus other major currencies has also helped to shrink the purchasing power of the Jordanian dinar and spur the inflation rate," he added.

Hourani belongs to the Islamic Action Front (IAF), Jordan's largest political party, which is at odds with the US policy in the region.

The Jordanian dinar has been pegged to the greenback since October 1995.

Central Bank of Jordan officials have shun calls for ending the dinar-dollar peg, saying it bestowed stability on the country's commercial dealings with other parts of the world.

Hourani contended that the continuation of the dinar-dollar relationship was motivated by "political reasons."

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Kuwait drops peg to dollar

KUWAIT CITY: Kuwait dropped its dinar’s peg to the dollar yesterday, throwing into disarray plans to create by 2010 a single currency in the GCC region.

Delays to a monetary union among the Gulf oil exporting states, including Qatar, were a principal reason for the switch that now links the Kuwaiti dinar to a basket of international currencies, the Kuwaiti government said.“(Monetary union) was delayed … and therefore we went back on this decision today,” Deputy Prime Minister Faisal al-Hajji said, referring to Kuwait’s decision to adopt the dollar peg in 2003 to prepare for the single currency.

Kuwait, also switched the exchange rate mechanism to a basket of currencies, had been battling speculators for weeks to defend the peg.Another reason was the dollar’s slide against other currencies Kuwait said that forced it to break ranks with fellow Gulf states to contain inflation from the rising cost of some imports.

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Pertinent Links:

1) Jordan Islamists demand an end to dinar-dollar pegging

2) Kuwait drops peg to dollar