DUBAI: Kuwait's dinar rose sharply against the US dollar in the forwards market on Monday in response to a report that the Kuwaiti central bank would allow local banks to deal in derivatives with foreign banks.
Al Rai newspaper quoted an unnamed source as saying the central bank had "informed treasury managers at banks that it no longer objects to Kuwaiti banks dealing in derivatives with foreign banks, as long as they deal in products approved by central bank regulations.
" A trader at a Kuwait-based bank, contacted by Reuters, confirmed the report, saying the central bank had communicated its new policy at a meeting with banks on Sunday.
A senior trader at another Kuwaiti bank said his bank had not yet received any formal communication from the central bank, but was making preparations for such trade. Contacted by Reuters, the central bank made no immediate comment.
One-year dollar/dinar forwards dropped to 130 points, their lowest level since November last year, from 265 points on Friday.
"Forwards are dropping on news that Kuwaiti local banks can start doing swaps and forwards in KWD with foreign banks," another foreign exchange trader in Kuwait said.
"This will increase KWD liquidity in the swap market, so the interest cost should come down."
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