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Foreign Exchange

Single currency: UAE pulls out of currency union

The United Arab Emirates has informed the secretariat of the Gulf Cooperation Council that it is pulling out of the proposed GCC monetary union, according to a report by the country’s official news agency.

The move came less than three weeks after Gulf leaders agreed that the headquarters of the central bank for the region would be located in Saudi Arabia.

The consensus view is that the UAE was worried that locating the bank in Saudi Arabia would give Riyadh undue power. The UAE had been hoping to host the central bank itself.

However, there are other theories as to why the UAE pulled out. The economic crisis has shown the importance of individual authorities retaining autonomy to deal with its effects.

The UAE is the second country after Oman to pull out of the currency union. Bahrain, Kuwait, Qatar and Saudi Arabia have reconfirmed their commitment, but UAE central bank governor Sultan Bin Nasser Al Suwaidi denied that the country was in talks to re-enter the process.

"We are not negotiating. For the time being, the position of the UAE is to withdraw," Al Suwaidi told reporters.

Integration
Advocates of monetary union say it would lead to greater integration across a region characterized for the most part by economies that on their own are small.

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