Saudi Arabia may be considering revaluing its riyal currency to calm concerns about the Gulf region’s link to the falling US dollar, according to a report yesterday in the al-Riyadh newspaper, which is close to the Saudi Arabian ruling family.

It quoted Abdul-Aziz al-Uwaisheg, head of studies and economic integration at the Gulf Cooperation Council, as saying: “Saudi Arabia might have started a study to change the riyal’s exchange rate, but it probably does not want to officially announce these studies to avoid creating concern in markets until a final decision is made.”

The Gulf Cooperation Council is a group of six states preparing for monetary union as early as 2010.

According to al-Riyadh, Mr al-Uwaisheg added: “There is a clear divergence over this issue, but . . . there is a common desire . . . to revalue and shift to a currency basket.”

A currency basket would mean the riyal being pegged to a number of currencies, not only the dollar.

Mr Uwaisheg claimed later that he had been misquoted. Al-Riyadh stuck by its story, according to Reuters.

The council, made up of Saudi Arabia, the United Arab Emirates, Qatar, Oman, Bahrain and Kuwait, will discuss a proposal to revalue their currencies when heads of state attend a summit in Doha, Qatar, next month. Five of the six peg their currencies against the dollar. This year Kuwait switched to a basket of currencies, including the dollar, euro, yen and sterling. Since the switch, Kuwait’s dinar has strengthened about 5 per cent against the dollar.

Inflation in Gulf states has reached record levels, as imports from Europe become more expensive because of the weakening dollar. Sultan Bin Nasser al-Suwaidi, Governor of the UAE Central Bank, said last week that the country may drop the dirham’s peg against the dollar in favour of a basket of currencies. Abdullah al-Attiyah, the Qatari Energy Minister, said last week that the dollar’s decline was a “concern” to OPEC members.

Gulf nations pegged their currencies to the US dollar to stabilise revenue from oil, which is traded in dollars.

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