The United Arab Emirates, which pegs its dirham to the dollar, reduced its over-night repurchase rate by 50 basis points to 3 percent on Thursday, matching a US rate cut a day earlier. Kuwait also cut its repurchase rate by 50 basis points.

The repurchase rate was 3.5 percent on Wednesday, the central bank said. The repo, introduced in November, is the UAE benchmark and sets the rate at which banks borrow funds from the central bank.

The Fed reduced its benchmark by half a percentage point on Wednesday, its second rate cut in eight days, as part of an effort to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch.

The central bank of Kuwait, the Middle East's fourth-largest oil exporter, reduced the repurchase rate to 3.5 percent from 4 percent.

It kept the benchmark discount rate steady at 5.75 percent, having slashed it by 50 basis points last week after an emergency 75-basis-point US Federal Reserve rate cut.

Kuwait broke ranks with its Gulf Arab neighbours in May and dropped its peg to the US dollar in favour of a currency basket.

The Fed reduced its benchmark by half a percentage point on Wednesday, its second rate cut in eight days, as part of an effort to halt a slowdown in an economy hit by a housing slump and a credit crunch. - Reuters