Tuesday, July 11, 2006

 

Syria Plans To End US Dollar Peg

Bloomberg has this on currency reserves. "Syria, under fire from the U.S. for the alleged support of terrorism, plans to end its currency peg to the dollar by year-end to reflect closer trade ties with Europe, central bank Governor Adib Mayaleh said. The Central Bank of Syria has already converted half its foreign-exchange reserves to euros, Mayalmi said. Syria's reserves, including gold, totaled $4.1 billion at the end of 2005, according to the U.S. Central Intelligence Agency."

"'We want to have a currency peg that will reflect our external trade,' Mayaleh said yesterday. The European Union is Syria's largest trading partner, taking half of its exports, he said."

"The country may instead link the Syrian pound to a weighted group of currencies including the euro or loans from the International Monetary Fund that are known as Special Drawing Rights, Mayaleh said. SDRs comprise the euro, dollar, yen and British pound."

"Most Middle East countries, including the six oil-producing Persian Gulf monarchies and Jordan, peg their currencies to the dollar. Egypt and Iraq manage floated currencies. The Syrian pound is pegged at 52.2 versus the dollar, according to data compiled by Bloomberg."

"Central bankers from Kuwait, Qatar, the United Arab Emirates, Russia, Sweden and Finland have this year indicated they aim to diversify their reserves away from the dollar."

Comments:
There is more than one issue to consider. Why a 'peg' and not a floating market? These artificial exchange rates create huge black markets, because the smaller countries almost always print too much money.

It sounds like they are going to have another artificial exchange mechanism. Still, it isn't a good sign for the greenback when countries thumb their noses at the worlds reserve currency.
 
Rogue states are doing this largely for political reasons, not economic ones.
It will be real news when the Saudis do the same.
 
Rogue states like Finland?

The Saudi royal family would be out of power in ten minutes without the US. I don't think they ever make this move.
 
lots of nation are diversifying or moving into gold.

the UAE was just the lastest.
 
Don't worry about Syria's economy, they don't even have any $$$ to use...

Syrians are victims of the regime
 
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