The UAE, Saudi Arabia, Kuwait and Bahrain have reduced key interest rates following a US rate cut of three-quarters of a percentage point on Tuesday. Saudi Arabia, which pegs its riyal to the dollar, cut the reverse repurchase rate to 3.5% from 4% and left the benchmark repurchase rate at 5.5 %.

The UAE, which also pegs its dirham to the dollar, cut its over-night repurchase rate by 75 basis points to 3.5%.

Kuwait also cut its interest rates by 50 basis points for the first time in 18 months.

Meanwhile, Bahrain which also pegs its currency to the dollar reduced the main interest rate on week deposits by half a percentage point to 3.5% and reduced the overnight deposit rate by a half percentage point to 3%, but it kept the lending rates unchanged.

[The reduction of interest rates in dollar-pegged currencies prevents speculators from moving vast amount of cash from one country to another to benefit from a higher interest rate.]

al-Quds, Jerusalem, January 23, 2008; Maktoob, Jordan, January 23, 2008; el-Wasat, Egypt, January 23, 2008; Elaph, London, January 23, 2008