Hotels hedge bets as revaluation fever grips UAE

DUBAI (Reuters) - Hotels in the United Arab Emirates, including those owned by Dubai's ruler, have started changing dollars into dirhams at as much as 17 percent below the official rate in anticipation of a revaluation.

Money changers, used by expatriates in the UAE to send savings home, have also jacked up rates, in many cases overnight, on expectations that the central bank would allow the dollar-pegged dirham to appreciate.

"We changed last night, I can't remember the last time we changed the rate," said a member of the concierge staff of the Ritz Carlton in Dubai. The Ritz was selling dirhams at 3.3 per dollar compared with 3.5 on Saturday, the official said.

The central bank has held the dirham's rate at 3.7625 to the dollar since 1997. Central Bank governor Sultan Nasser al-Suweidi said last month he was under intense social and economic pressure to sever the peg to the tumbling dollar and track a currency basket to contain inflation.

"This is fuelling the debate about revaluation and adding to market speculation," said John Sfakianakiss, chief economist at SABB bank, HSBC's affiliate in Saudi Arabia. "Is it something legal for hotels to do this? Who is regulating this?"

Reuters called a dozen hotels across the UAE, the world's sixth largest oil exporter, and most said they were charging higher rates for the dirham.

The sail-shaped Burj al-Arab hotel, Dubai's most famous landmark, was selling dirhams at 3.2 per dollar compared with 3.45 on Saturday, a concierge staffer said.

The Burj is owned by the Jumeirah Group, controlled by Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, through his Dubai Holding investment arm.

Emirates Towers, another Jumeirah hotel, was charging 3.13 dirhams per dollar. That was changed from 3.5 per dollar on Saturday, a staff member said.

Le Meridien Al Aqah, in the northern emirate of Fujairah, changed its rate to 3.14 per dollar from 3.54. "It happened yesterday, it was sudden change," a concierge staffer said.

Even though Suweidi said he would only act in concert with other Gulf oil producers preparing for monetary union as early as 2010, his remarks ratcheted up expectations of a revaluation and drove the dirham to a 17-year high on Friday.

On Sunday forward rates showed investors expecting the dirham to appreciate 3.54 percent in a year to 3.5425 per dollar. They were pricing in a gain of just over 2 percent on November 14, indicating how speculation has grown in the runup to a Gulf summit this week that could decide on currency reforms.

Money changers were also expecting a revaluation.

UAE Exchange, which has branches in each of the country's seven emirates, was offering 3.3 dirhams per dollar compared with 3.665 the previous day, an official said, citing the rate at its branch in Dubai's biggest mall.

(Additional reporting by Dayan Candappa; Editing by Valerie Lee, Phil Berlowitz)