No risk to dollar peg, would buy US debt if yields rise: UAE

ABU DHABI: The United Arab Emirates will keep its US dollar peg in the aftermath of S&P's downgrade of the world's biggest economy, a central bank official told Reuters on Sunday, and saw no credit risk in investing in US treasuries at present.

S&P cut the US long-term credit rating by a notch to AA-plus in an unprecedented blow amid concerns about the nation's budget deficits and climbing debt burden. It called the outlook "negative," signalling another downgrade is possible in the next 12 to 18 months.

"We are pegged to the dollar and will keep it. We don't see the dollar collapse. Because the problem is not in the US only, but also in the European markets," said Mohamed al-Tamimi, deputy executive director at the UAE central bank's treasury department.

The UAE central bank does not hold any US treasury bonds or government financial instruments, it said in July.

"But if the yields go higher to a justified level, there is no reason why we will not invest in US treasuries," Tamimi said on Sunday.

Copyright Reuters, 2011