Bin Laden remarks make Gulf dollar peg likelier

By Daliah Merzaban

DUBAI (Reuters) - Gulf Arab oil producers may be less likely to drop their currency pegs to the weak U.S. dollar after Al Qaeda leader Osama bin Laden criticized dollar pegs as "unjust and arbitrary", economists said on Sunday.

The Saudi-born militant leader urged Muslims in a video recording on Saturday to support militants so they can "preserve your oil and wealth and protect your money that is slipping between your fingers due to the unjust and arbitrary dollar pegs."

"Your support to sincere mujahideen (holy fighters) ... guarantees all aspects of your security," bin Laden said.

Saudi Arabia and four other Gulf countries have insisted on their commitment to maintaining pegs to the dollar, which hit all-time lows versus the euro and a basket of major currencies last month.

"Comments like this will make their commitment to the peg even stronger and it will be even harder for them to move away from the dollar," said Marios Maratheftis, regional head of research at Standard Chartered Bank.

"They don't want this to become more of a political topic than it already is."

Annual inflation in Saudi Arabia, which has not changed the riyal's rate against the dollar since 1986, hit 5.35 percent in October, the highest since at least 1995.

Its smaller, wealthier neighbors, including Qatar and the United Arab Emirates, are concerned the weaker dollar is eroding savings of expatriates, who dominate their workforce, and hampering their central banks in the fight against inflation.