The four Gulf Arab states that plan to establish a joint central bank may initially peg their single currency to the dollar, reported Bloomberg, citing Howard Handy, the chief economist at Samba Financial Group. However, a common Gulf currency that is pegged to the US dollar will not benefit the region as most countries in the GCC, with the exception of Kuwait, have their currencies already linked to the greenback, said a senior official of Standard Chartered Bank on Wednesday. Effectively, the GCC already has a single currency because of the common dollar peg. So the new unified currency, if denominated in dollar, will not make any difference, said Marios Maratheftis, the bank's regional head of Research for Middle East, North Africa and Pakistan. Handy told Bloomberg earlier that before the introduction of the unified currency, “we do not expect any changes to GCC exchange rate regimes, including in those countries currently opted out of monetary union,” “In the first instance, we also expect that the single currency will retain the dollar peg.” Speaking at a banking seminar, Maratheftis said “there are some pre-requisites to have a successful common currency. First, a more flexible monetary policy and a more flexible exchange rate regime. Second, we need to see strong capital markets in the region, and third, a strong supra national institution.”
