It’s all but official: five Middle Eastern nations will form an EU-style Monetary Union by 2010. Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and Bahrain have signed a draft agreement to participate in a single-currency system, ostensibly to stimulate intra-regional trade. In fact, the Dollar’s recent volatility is probably the driving force behind this initiative. All five countries currently peg or formerly pegged their currencies to the Dollar, which contributed to domestic inflation as the Dollar depreciated. If this arrangement is implemented successfully, it could provide the impetus for similar currency unions in Asia and Africa. Bloomberg News reports:

The agreement allows for the creation of a monetary council, a precursor to the Gulf central bank.  The council will be responsible for deciding the level at which the Gulf currency is pegged to the dollar, aligning interest rates, monetary tools and goals.

Read More: Gulf Central Bankers May Adopt Monetary Union