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Syrian pound 'stabilising' after dropping peg

DUBAI — Syrian central bank Governor Adib Mayaleh said the local currency is 'stabilising' since the eastern Mediterranean state became the second Arab country to end its peg with the dollar.

"This is stabilising the currency the most in more than 20 months, despite major political pressures that we suffer from,'' Mayaleh said on Friday in a telephone interview from Damascus.

"As soon as we announced the de-peg we started to see an improvement in the exchange rate.''

Mayaleh said on June 4 Syria would follow Kuwait and end the Syrian pound's link to the dollar and peg it to a broader range of currencies to curb rising import costs and inflation. The currency was dragged lower against the euro by a 10 per cent slide in the dollar last year. Kuwait switched to a currency basket in May.

"It certainly reduced the pressure on the currency,'' said Jon Harrison, an emerging-market currency strategist at Dresdner Kleinwort in London. "There is a lot of pressure on currencies to de-peg and we have seen Kuwait and Syria do it, so that adds to the pressure on the others.''

The Syrian pound has strengthened 2.1 per cent against the dollar since June and has weakened to 69.56 per euro yesterday from 66.17 on Jan. 6, according to central bank rates.

Record levels of inflation in Saudi Arabia, the United Arab Emirates, Qatar, and Oman have increased speculation that the countries will have to change their dollar pegs. The central bank governors of Saudi Arabia, the UAE., Qatar, Oman and Bahrain have stated that they have no plans to revalue.