The UAE prefers to use dollar-based instruments such as deposits rather than low-yielding US Treasuries to manage foreign reserves, according to the country's central bank governor.

Sultan Nasser Al Suwaidi said on Sunday that he expected the UAE economy to grow by up to four per cent this year.

Concerns over US Treasuries, one of the favourite instruments for the world's central banks in managing reserves, are rising as US politicians must reach a deal to raise the debt limit and avoid a potential default on the country's $14.3 trillion debt by August 2.

Talks fell apart on Thursday as Republicans walked out over Democrat demands for tax increases. Asked how much in US Treasuries the UAE central bank held as part of its reserves, Al Suwaidi said: 'Not much.'

'US Treasuries have two problems. The rate is very low and if you want to sell ... you have to sell at a large discount. It's liquid, but for liquidity you have to pay a price,' he said on the sidelines of the Bank for International Settlements annual meeting.-Reuters