It’s official. The United Arab Emirates and Qatar can be added to the list of countries that are planning to diversify their foreign exchange reserves. Both countries have announced their intentions to shift 5% of their reserves into Euros. While other Arab nations have been coy about the prospect of diversification, it appears the entire region will soon follow suit. The wave of announcements is eerily redolent of earlier this year, when certain Asian countries announced similar plans. While Middle Eastern countries maintain lower forex reserves than most East Asian countries, any talk of diversification is still to be taken seriously. As the Euro has declined against the USD, many nations have smelled a cheap and easy opportunity to diversify. The Khaleej Times Online reports:

In the three years to 2004, the euro gained nearly 60 per cent against the dollar, due partly to expectations central banks in the Middle East and Asia are diversifying away from the falling dollar into the euro.

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