In May, the Central Bank of Kuwait announced the decision to abandon its dollar peg and link the dinar to a basket of currencies that includes the dollar, the sterling and the yen. While surprised by the announcement, observers were not shocked. The new arrangement is in fact a return to the policy that existed before the peg. Markets were unruffled, although the policy shift was followed by an immediate upward revaluation in the dinar of about 0.4%.
For a country as dependent on oil as Kuwait,